Manila: Two more Pakistan banks have signed up to the Asian Development Bank’s (ADB) Trade Finance Program (TFP) which should make it easier for companies to import critical goods into the country and export other products.
The participation of NIB Bank Ltd. and Soneri Bank Ltd. in the TFP means there are now 13 Pakistani banks signed up to the program.
The TFP provides finance and guarantees through banks to support trade transactions in developing countries. Companies and banks in emerging markets often have difficulties accessing trade finance which undermines trade and slows economic growth and job creation.
Last year, the TFP supported $ 2.76 billion in trade in emerging Asia. Pakistan’s share of that was $832.6 million, the most among ADB’s developing member countries. The TFP focuses its resources on Asian countries most in need of trade finance support and therefore does not assume risk in relatively developed markets such as the People’s Republic of China, India, Malaysia, and Thailand.
“By expanding the reach of the Trade Finance Program in the Pakistan banking sector, we will help make trade finance available where necessary to an even wider array of firms, including small and medium-sized enterprises,” said Robert van Zwieten, Director in ADB’s Private Sector Operations Department that oversees the TFP.
Smaller firms typically have more trouble than larger, well-known companies in accessing trade finance from banks because they have a limited credit history or because banks prefer to lend to known customers.
“Further expanding TFP coverage in Pakistan will be a way to keep the country firmly on the road to sustainable economic recovery,” said ADB’s Pakistan Resident Mission Country Director Rune Stroem.
The TFP has provided an array of support for trade in Pakistan. In addition to general trade finance, the program offers guarantees to support imports of oil into Pakistan, which relies heavily on oil from overseas to keep its industry and homes running. In the immediate aftermath of extensive floods in mid 2010, ADB implemented a special $500 million Flood Relief Facility for Pakistan to help companies import basic commodities such as food and medicine and capital equipment for agriculture and infrastructure reconstruction.
Through its partnerships with over 200 banks around the world, the triple A rated ADB has supported $ 5.2 billion in trade since the TFP started operating in 2004, $2 billion of it in Pakistan. As well as providing finance, the program also helps to bolster links between banks in emerging markets and big international banks. Over the longer term, these can reap rewards by embedding the region’s banks into the global banking community, making business easier.