Global Trade & Supply Chain Solutions Danny Ip - July 2013 Best - PowerPoint PPT Presentation

Global Trade & Supply Chain Solutions Danny Ip - July 2013 Best Trade Global Warehouse Global Trade Best Development Facilitation Program Finance Program Finance Program Finance Institution in Africa

IFC is a Member of the World Bank Group MIGA IBRD IDA IFC Multilateral International Bank for International International Finance Investment and Reconstruction and Development Corporation Guarantee Agency Development Association Est. 1945 Est. 1960 Est. 1956 Est. 1988 To promote institutional, To promote institutional, To promote private sector To reduce political Role: legal and regulatory reform legal and regulatory development investment risk reform Governments of poorest Private companies in Foreign investors in Governments of member countries with per capita member countries member countries Clients: countries with per capita income of less than income between $1,025 $1,025 and $6,055.  Equity/Quasi-Equity  Political Risk Insurance  Technical assistance  Technical assistance  Interest Free Loans  Long-term Loans Products:  Loans  Risk Management  Policy Advice  Policy Advice  Advisory Services Shared Mission: To Promote Economic Development and Reduce Poverty 2

Over US$100 billion Invested in Emerging Markets since 1956 Shareholders 184 member countries  Take market risk with no sovereign guarantees  Promoter of environmental, social, and corporate S&P & Moody’s Rating AAA/Aaa governance standards Total Assets* US$76 billion  Focus on development impact Portfolio* US$56 billion  What we look for from clients:  Commitment to project (equity) Committed in FY12* US$20.3 billion  Successful track record & long-term strategy - Own Account - US$15.4 billion  Integrity - Mobilized - US$ 4.9 billion FY12 Commitments by Region # of Active Projects 1,737 Sub- East Asia & Saharan the Pacific # of Countries 129 Africa 17% 18% South Asia # of Equity Investments 800 Europe & 8% Central * As of 6/30/2012 Asia Middle Latin 19% Largest global development institution focused America East & &the North exclusively on the private sector in developing Caribbean Africa countries 24% 14% 3

Trade and Supply Chain Products Finance over USD50 billion of emerging market trade since 2005 Transactional trade  Global Trade Finance Program (GTFP) Trade portfolios and systemic solutions  Global Trade Liquidity Program (GTLP)  Critical Commodities Finance Program (CCFP) Supply chain finance  Global Warehouse Finance Program (GWFP)  Global Trade Supplier Finance (GTSF)  Distributor finance  Structured trade finance 4 10 October 2012

Global Trade Finance Program (GTFP) Launched in 2005, the GTFP provides risk Cumulative Program Statistics Since 2005 (as of September 30, 2012) mitigation by guaranteeing trade-related Total # / USD of Gtees 13,569 / $20.2B payment obligations of more than 250 eligible No. of Issuing Banks 262 in 95 countries financial institutions in emerging markets. No. of Confirming Banks 239 in 94 countries (1,000+ with affiliates) PROGRAM FEATURES TOTAL CLAIMS ZERO  AAA-rated – Basel II benefits FY12 GUARANTEES BY REGION  Coverage up to 100 percent (most active countries listed)  Umbrella guarantee covers country and LATIN AMERICA MIDDLE EAST & NORTH 13% & the CARIBBEAN commercial risk AFRICA 1. Brazil 1. Lebanon; 2. Pakistan 28% 2. Guatemala  Same-day issuance EUROPE & 16% CENTRAL ASIA 1. Russia; 2. Turkey  Three-year maximum tenor SUB-SAHARAN  L/C applicants must be majority private 21% 22% ASIA AFRICA 1. Vietnam sector 1. Nigeria; 2. Ghana 2. China 5

Trade Portfolios & Systemic Solutions Funded and unfunded risk-sharing facilities in trade portfolios by IFC and program partners (governments, DFIs) aimed at Program partners increasing trade finance in developing countries Program partners co-finance with GTLP : Global Trade Liquidity Program (launched 2009, renewed 2012) funding or counter-guarantees CCFP : Critical Commodities Finance Program (launched 2012) Benefits to Bank: Structure: IFC channels funding or • Risk mitigation : IFC’s AAA rating, • IFC provides guarantee or funding guarantees for up to 50% on effective in managing the effects of as agent and primary guarantor, portfolio of trade transactions Basel II & III with counter-guarantees from DFIs • Capacity enhancement: relieves • Two-year program with one-year Originating bank headroom, single-client, country- extension Originating bank retains 50% exposure constraints • Pricing: market-based pro-rata of the aggregate amount of • Ease of administration: deal only sharing portfolio of trade transactions with IFC, as agent Focus Areas: • Large facilities: sizeable solutions • Global: emphasis on Africa and low- permit effective trade portfolio risk income countries management Emerging market banks • Sectors: Agriculture, energy or corporates 6

Global Warehouse Finance Program Risk mitigation for banks’ food/agriculture portfolio • Supports banks when lending to the agricultural sector against Program partners warehoused commodities Program partners co- 3. IFC channels funding finance with funding or • or guarantees for up to Banks can support increased use of counter-guarantees 50% on portfolio of WR or CMA by trading companies or warehouse receipts producers Bank • 2. Warehouse Prequalified sub-borrowers receipts issued by warehouse • Funded or unfunded: 50-50 risk 4. WHR facility sharing • Facility tenor: one year extendable 1. Grain/produce stored in third-party up to three years warehouse Agricultural Storage • Average transaction tenor: producers company 4-6 months 7

Working Capital through the Value Chain Together, IFC’s Supplier Finance and Distributor Finance programs can deliver efficient financing for SMEs both up and downstream of a major corporate, drawing on the value chain linkage with the “anchor” to improve the risk profile Corporate Value Chain Seller or Resellers or Suppliers manufacturer Distributors Consumers sub-distributors (anchor) Potential reach of supplier finance Potential reach of distributor finance 8

Global Trade Supplier Finance Funding and risk mitigation for banks’ supply chain finance clientele • Provides banks with additional 1. Buyer 2. Supplier views credit capacity to support uploads invoices and requests clients’ suppliers from higher - invoices early payment of approved risk countries (automated Emerging SCF invoices process) Buyer market platform • Provides funded and unfunded suppliers risk-sharing of up to 100% of a client’s accounts receivable 3. Financier accepts early payment 5. Financier pays discounted requests • IFC may also provide liquidity invoice amount and discount A/R itself Bank 6. Buyer pays full invoice • A/R is discounted using market- amount on due date based pricing (automated transfers 4. IFC provides funding or established) guarantee coverage • IFC accepts bank proposed Program discount rate on risk-shared receivables partners Mobilization 9

Distributor Finance Financing corporates ’ emerging -market distribution chains IFC ROLE Benefits to Bank: • Funded or unfunded risk-sharing facilities and partial • Risk-mitigation: portfolio guarantees management tool • Capacity building: IFC’s Advisory Services, including SME • Strengthening business line Management Services, can engage to improve financial with global corporate clients sustainability of distributors • Capacity expansion in BANK ROLE distributor finance business Bank Origination and monitoring in: Focus: food, agribusiness, • Receivables-based financing to seller health, energy efficiency, • Overdrafts or loans to distributors/sub-distributors infrastructure, and • Floor-planning and equipment financing, including end- pharmaceuticals user financing SELLER provides some contractual support: Seller first loss or counter- Distributor Sub-distributor End customer guarantee, stop (anchor) in emerging market in emerging market in emerging market shipment clause, etc. 10

Structured Trade Finance Funding and risk mitigation for banks’ cross -border or domestic commodity trade portfolio Products supplied • Supports large cross-border and domestic trade using collateral management to support lending Products sold L/C Approved Issuing • Exporters Emphasizes strategic extinguishes facility bank commodities, including Import/sale Retailers agricultural inputs, energy and L/C 60-90 soft commodities request days L/C • Provides funded or unfunded risk Payment from participation with a partner bank, retailers to Payment from distributors who can arrange for escrow, importers to exporters [15-21 days manage collateral, insurance, etc. [60-90 days credit] credit] • Environment & social Facility structure requirements to be met by facility share risk with bank on Payment flow importers ’ obligations Product flow L/C flow 11

Strategic Partnerships Government/DFI Partners Bank Partners 12