Take steps to enhance the ability of the GTFP to support trade transactions that require longer-term tenures to help meet demand in this segment of the trade finance market.
6. An original goal was to support longer-term trade transactions for which trade finance was not readily available in the market. In practice, the average tenure of GTFP guarantees has only been slightly longer than the market average. An area of clear demand from IEG's surveys and interviews with clients was for the GTFP to cover longer-term trade finance tenors.
Original Response: Agreed: IFC agrees that there are gaps in the tenor offerings of commercial banks as well as Berne Union members, and has set into motion the IFC investment process that will request from the Board approval this fiscal year for GTFP to better meet client needs by extending tenors within newly established guidelines for the importation of small/medium ticket capital equipment.
IFC Action 11: Launch medium term GTFP enhancement to support mid tenor capital equipment
Indicator: Clearance from board, banks enter program
Target: Board paper cleared, program launched, 5 banks in program
Timeline: 2Q15
In its FY15 Update, IEG acknowledged that this recommendation has been fully adopted by the Management based on the fact that a Board Report --- The Medium-Term Enhancement of the Global Trade Finance Program (IFC/R2013-0426) --- which was to extend the capability of IFC's Global Trade Finance Program to support deliveries of equipment and machinery into emerging markets by providing guarantee coverage on Medium-Term letters of credit and similar trade finance instruments for up to a total tenor of 5 years, was approved by the Board on December 26, 2013. Furthermore, based on the FY15 Management Update, 11 Banks have entered this program, exceeding the target of 5. Given the above evidence, IEG upgrades the Implementation Status to Inactive (All actions are completed).
IEG acknowledges that this action item has been fully adopted by the management based on the following information in the last yearâs MAR â-- The Medium-Term Enhancement of the Global Trade Finance Program document (IFC/R2013-0426) was approved by the Board on December 26, 2013. The purpose of this board report (See below para 11-12, page 4 for more details) was to extend the capability of IFCâs Global Trade Finance Program (Project #23898) to support deliveries of equipment and machinery into emerging markets by providing guarantee coverage on medium-term letters of credit and similar trade finance instruments for up to five years total tenor. Based on the most recent managementâs update, 11 banks entered the program, exceeding its target of 5.
â11. IFC proposes to expand the reach of GTFP by providing guarantee coverage on medium-term letters of credit and similar trade finance instruments, for up to five years total tenor, issued to support cross-border deliveries of equipment and other critical capital goods into emerging markets. The up to five-year tenor will allow for appropriate matching for the customary trade and trade financing cycle for the capital goods asset class: under a standard letter of credit transaction, this would include the equipment ordering period, equipment fabrication period, cross-border shipment period, installation and commissioning period and, where requested, a post-import equipment financing period. The medium-term coverage will be provided initially to a limited number of existing GTFP clients and could be offered later to new clients.
12. IFC proposes that GTFP makes available no more than US$500 million of its existing US$5 billion outstanding portfolio ceiling to guarantee longer tenor transactions for trade in critical capital equipment..â. ---
Referring back to the approved MAR Action plan, the IFC is responsible for meeting the target of board paper clearance and accepting five banks into the program. To report as agreed, the Board Acceptance date for GTFP's capital equipment program, which allows for trade finance lines with tenors up to five years, was December 26, 2013, (through IFC Board Paper IFC/R2013-0426. The first Investment Review Meeting was held in June 2014, which ushered eleven banks into the program.
The Medium-Term Enhancement of the Global Trade Finance Program document (IFC/R2013-0426) was approved by the Board on December 26, 2013. The purpose of this board report (See below para 11-12, page 4 for more details) was to extend the capability of IFCâs Global Trade Finance Program (Project #23898) to support deliveries of equipment and machinery into emerging markets by providing guarantee coverage on medium-term letters of credit and similar trade finance instruments for up to five years total tenor. Based on the most recent managementâs update, 11 banks entered the program, exceeding its target of 5.
â11. IFC proposes to expand the reach of GTFP by providing guarantee coverage on medium-term letters of credit and similar trade finance instruments, for up to five years total tenor, issued to support cross-border deliveries of equipment and other critical capital goods into emerging markets. The up to five-year tenor will allow for appropriate matching for the customary trade and trade financing cycle for the capital goods asset class: under a standard letter of credit transaction, this would include the equipment ordering period, equipment fabrication period, cross-border shipment period, installation and commissioning period and, where requested, a post-import equipment financing period. The medium-term coverage will be provided initially to a limited number of existing GTFP clients and could be offered later to new clients.
12. IFC proposes that GTFP makes available no more than US$500 million of its existing US$5 billion outstanding portfolio ceiling to guarantee longer tenor transactions for trade in critical capital equipment..â.
Board Paper has been cleared and program launched
On track to complete the action by 2Q15