Indonesia and Bangladesh receive $177 million in trade finance facilities

The two facilities double as a means of enhancing trade and improving banking reporting to the IFC.
Standard Chartered (SCB), the World Bank Group's International Finance Corporation (IFC) and the Dutch Development Agency (FMO) have committed a total of US$177 million for two separate trade finance facilities, one for Indonesia and the other for Bangladesh.

The first trade facility will be extended to Indonesia and comprises a US$125 million, five-year facility. The facility is designed to provide easier access to short-term financing for Indonesian businesses and additional letter of credit confirmation lines to selected local commercial banks. In addition, IFC will guarantee 40% of each transaction.

The selected banks are Bank Mandiri, Bank International Indonesia, Bank Central Asia, Bank Danamon, Bank CIC and Bank NISP. According to Vibhuti Sharma, vice president of development organizations at SCB, a joint SCB and IFC review of participating banks has set up individual bank limits to the facility. Other Indonesian banks can be included provided IFC credit quality standards are met.

In the short term, Sharma expects that the facility will mean better pricing for private sector importers, while in the long term, the revolving facility ensures guaranteed availability of limits for participating banks. Importantly, the facility will ensure that local banks improve their reporting, as participating banks are required to provide regular financial and other reports to the IFC, thereby improving reporting standards.

The second facility is a US$52 million trade enhancement facility for Bangladeshi small and medium sized importers and exporters. Under the terms of agreement, IFC and FMO will jointly guarantee SCB up to $26 million of the total facility amount, and up to 50% of each transaction.

The two-year revolving facility is aimed at ensuring better accessibility to letters of credit confirmation by guaranteeing documentary credits originated by selected commercial banks. The banks include Dahaka Bank Limited, Dutch Bangla Bank Limited, Eastern Bank Limited, National Credit and Commerce Bank, Prime Bank and South East Bank Limited.

According to Sharma, the facility is aimed at improving country limits and pricing issues. The participating Bangladeshi banks are also required to submit financial and other reports to the IFC in an attempt to improve reporting.