Oct 23, 2008 (LBO) – The Asian Development Bank (ADB) and Japan’s Sumitomo Mitsui Banking Corp. (SMBC) have launched a trade finance scheme for developing countries the initial phase of which will be in Sri Lanka and Pakistan. An ADB statement said the bank and SMBC have entered a risk-sharing agreement that will enhance support for international trade in developing countries in Asia.
The Risk Participation Agreement initiative, which falls under the umbrella of ADB’s Trade Finance Facilitation Program (TFFP), will expand trade finance facilities to selected financial institutions on a risk-sharing basis.
The transactions covered in the scheme range from short-term letters of credit to tenors that last up to two years.
The ADB’s Trade Finance Facilitation Program plays an important role in the bank’s efforts to develop public -private partnerships through risk mitigation.
“TFFP works with private-sector financial institutions to support trade in developing countries by sharing the risk of financing and guaranteeing trade transactions,” the statement said.
The ADB said these types of risk sharing agreements can be particularly important in developing intraregional trade between smaller developin