Trade finance offers a significant opportunity to expand our development impact.
International trade powers economic development—and trade depends on the availability of finance. Yet, for businesses in developing countries, trade finance is one of the first things to become inaccessible in times of financial turbulence.
This year, the economic downturn in developed countries hurt businesses in Asia, Africa, and Latin America. Several European banks, traditionally big suppliers of trade finance, cut back in many developing countries. As the availability of trade finance dwindled, its cost rose significantly.
IFC has stepped in to bridge the gap, playing a leading role among multilateral development banks. Over the last few years, we have significantly increased our investments in trade finance, launching an array of innovative global initiatives to expand it in developing countries. This year, we also became the first international financial institution to begin measuring the development impact of our work in trade finance.
We think trade finance is a significant area of opportunity to expand our development impact. That’s partly because the private sector can’t fill the need on its own—the “market gap” in trade finance is at least $25 billion, by some estimates. But it’s also because we’ve found that trade finance allows us to make progress on all of our strategic priorities, helping improve the lives of people who need us most.
Our Global Trade Finance Program has issued more than 12,500 guarantees totaling $19 billion since 2005, more than half of which went to the poorest countries. Our work has opened the door for us to engage in more than 15 fragile and conflict-affected areas. Of the trade-finance guarantees issued under the program, more than 80 percent has benefited small and medium enterprises. More than 25 percent of our commitments under the program has supported farmers and agribusinesses.
In addition, our Global Trade Liquidity Program has supported $21 billion in trade since it was launched in 2009. In FY12, our commitments in the two programs totaled $6.1 billion—a 23 percent increase over FY11.