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EBRD wins Trade Finance Award

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It's not once or twice, but three times in a row that Euromoney Trade Finance Magazine has bestowed its prestigious annual Trade Finance Award on the EBRD.

So what does the Trade Facilitation Programme (TFP) do that wins such praise and appreciation from the trade finance community? It promotes foreign trade to, from and within Central and Eastern Europe and the Commonwealth of Independent States (CIS). Through the programme, the EBRD provides guarantees to international commercial banks (confirming banks), takes the political and commercial payment risk of international trade transactions, and offers direct financing of banks in the region in the form of short term cash advances. Since 1999 the TFP has been enabling local banks to provide trade financing and given local entrepreneurs in Eastern Europe and the CIS much needed support to expand their import and export trade.

The TFP now includes over 90 issuing banks in 20 countries of operation and over 500 confirming banks in 67 countries worldwide, including 128 banks from the EBRD region. The number of transactions has been steadily increasing over the years, totalling 1,089 (or about 100 transactions per month) and an impressive annual turnover of €500 million in 2004, by far the best year in the programme's history.

Why so good?

"Attracting so many commercial participants and building up a unique network of banks promoting trade finance have been key to the programme's success," stresses Rudolf Putz, senior banker in TFP. "We are very fast, issuing a guarantee within 24 hours of receiving a request for it. Our partner banks appreciate our customer-friendly approach and the ability to respond to any email or phone enquiry within 24 hours."

Particularly noteworthy is the fact there’s never been a claim or a loss under the TFP.

Promoting Small and Medium Enterprise (SME) development is at the top of the EBRD's agenda and SME transactions form the majority of TFP business. "More than 50 per cent of deals concluded since 1999 have covered transactions under €100,000. In November 2004 the programme signed its 3,000th transaction – financing the import of $55,000 worth of plastic window parts from Turkey by a private Kyrgyz importer," adds Mr Putz.

Noteworthy is the fact that TFP is the largest provider of trade finance to early-transition countries. "With transactions doubled in Armenia and Tajikistan, the EBRD has the largest exposure in these countries regarded by many commercial banks as too small or too risky to finance," adds TFP’s Daniel Bolschun.

Restoring trade links

Another important goal of the TFP is supporting intra-regional trade through creation or restoration of traditional trade links between the Bank's countries of operation. Since the start of the programme, the number of intra-regional transactions has been steadily growing, with over 150 intra-regional transactions financed in 2004. One example of an intra-regional transaction in south-eastern Europe is the import of paper from Croatia into Serbia, financed by a letter of credit issued by Eksimbank Serbia to Hypo-Alpe-Adria Bank Croatia. "This transaction also shows the transition and graduation process promoted by our programme," stresses Mr Putz "While some Croatian banks used the TFP in the past for financing imports into Croatia, they now do not need the programme any more as issuing banks and use it instead as confirming banks, financing exports from Croatia to other EBRD countries of operation."

Donors' funds go a long way

The Euromoney 2005 Award is expected to further attract donor funds from international governments (already including Austria, Canada, Germany, EU, France, Ireland, Netherlands, Sweden, Switzerland, Taiwan and the UK). Since many issuing banks have limited experience and technical ability to handle trade finance transactions, the EBRD initiated a number of documentary and structured trade finance trainings paid with donor funds provided by the governments of Austria, France, Ireland and the United Kingdom. These funds have been well invested: more than 300 bankers of 65 banks in 15 countries in south-eastern Europe and the CIS have already become more expert in trade finance free of charge. In addition, consulting services have been provided to banks and funded by the governments of the Netherlands for Russia and Ukraine, Switzerland for Central Asia, Canada for Georgia, Germany for Azerbaijan, Ireland for Armenia, Sweden for Serbia and Montenegro and Taipei China for the TFP.

Donors, particularly from Switzerland, Germany (KfW), the Netherlands, Norway and Austria, also play a significant role in supporting the TFP through their risk-sharing funds. These funds support programme activities in south-eastern Europe, the Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan, Georgia, Armenia and Moldova and enable the EBRD to provide longer tenors and take higher exposures in trade transactions.

Following the EBRD example

Being voted the Best Development Bank by readers of the Trade Finance Magazine has made an impact on members of the trade finance community. "When the Asian Development Bank, the Inter-American Development Bank and the International Finance Corporation learned about the success of the TFP activities," Mr Putz adds, "they decided to set up similar programmes in other parts of the world. The awards, and more importantly the results of our programme, have also motivated development agencies – DEG Germany and FMO Netherlands – to start co-financing with the EBRD."

17 June 2005