CDC and Standard Chartered sign a US$100m risk participation arrangement

Incremental trade volume in excess of US$1b is expected.

According to a release, CDC Group plc, the UK's development finance institution, and Standard Chartered Bank have signed a US$100 million risk participation arrangement that will help increase the availability of trade finance in developing countries, thereby boosting job creation and economic growth.

The agreement – which is expected to generate an estimated incremental trade volume in excess of US$1 billion over the three year life of the transaction – will boost the level of trade finance in some of the poorest countries of Africa and South Asia.

Under the agreement, the two institutions will bear the risks of local banks involved in supporting trade flows of Standard Chartered’s clients. The local banks will be able to pass on the benefits of the facility by offering trade finance to their clients who rely on trade for growth and job creation.

The global financial crisis sharply reduced the availability of trade finance in developing economies and CDC and Standard Chartered have been working to promote trade finance arrangements that maintain and expand financing lines, such as letters of credit and bank guarantees.

Diana Noble, CDC’s Chief Executive said:

“Growing businesses in Africa and South Asia continue to find it difficult to get the finance they need from local banks to help them reach international markets. Our arrangement with Standard Chartered will help boost trade finance which is fundamental to economic development.

“This is the first time that CDC has undertaken a bilateral risk-sharing deal and in doing so we’ve been able to target precisely our support to countries in Africa and South Asia that most need it. This is a new way for CDC to get its capital to work and with Standard Chartered we have a partner with an excellent network and understanding of our markets. By working together we can support exporters and importers in poorer countries.”

“We are delighted to be partnering with the CDC for its first bilateral risk-sharing programme. As trade finance leaders across Asia, Africa and the Middle East, we are committed to encouraging global trade – the lifeblood of the world economy – and are pleased to be building on our successful track record of supporting the growth of trade flows through risk sharing programmes,” commented Jiten Arora, Global Head of Sales, Transaction Banking, Standard Chartered Bank.