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The International Financial Corporation (IFC), a member of the World Bank Group, and Standard Chartered have established a $1 billion risk-sharing arrangement to increase the availability of trade finance in emerging markets. According to a statement released on Thursday, the trade facilitation agreement will increase trade flows in developing countries and narrow the $1.5 trillion gap in global trade finance.

The partnership entails providing support to local banks in Africa, Middle East and Asia to offer trade finance products to businesses. Under the partnership, IFC and Standard Chartered will share the risk of a portfolio of trade finance transactions by corporate and small and medium-sized enterprises (SME), with each of the two institutions contributing up to 50 per cent of the portfolio, or $500 million each. The risk-sharing arrangement is expected to further generate over $4 billion in trade finance across markets in Africa, Asia, and the Middle East over the next three years.

The partnership comes at a time when many global banks are pulling back from the trade space. According to the two institutions, the partnership builds on Standard Chartered’s longstanding presence in emerging markets and leading trade finance capabilities, and IFC’s global reach and market coverage to increase the availability of trade finance in some of the most challenging markets, including some of the world’s poorest countries.

"Trade is a key driver of economic growth in emerging markets,” said Paulo de Bolle, Senior Director of IFC’s Financial Institutions Group. “This facility is a unique partnership that can help counter de-risking trends in developing countries and support real-sector demand for trade finance.”

The partnership is considered a highly effective means of providing funds to facilitate trade in emerging markets and help local and regional companies, some of which are credit-constrained and who often rely on bank trade facilities to manage cash flows and purchase raw inputs.

“As a leader in trade finance connecting our clients across the world’s most dynamic corridors, we are committed to facilitating global trade and driving the growth and prosperity of local economies,” said Nicolas Langlois, Global Head of Trade Distribution, Standard Chartered. “We are delighted to be partnering with IFC to further our efforts.”