On December 12, 2024, the International Finance Corporation (IFC) and the Hongkong and Shanghai Banking Corporation Limited (HSBC) announced a strategic partnership aimed at boosting trade flows in emerging markets through a $1 billion risk-sharing facility. This initiative is designed to help banks in these regions increase their lending capacity to support cross-border trade.
The $1 billion facility will see IFC and HSBC equally share the risk on a portfolio of trade-related assets, with a focus on emerging-market banks in 20 countries across Africa, Asia, Latin America, and the Middle East. This collaboration falls under the IFC’s Global Trade Liquidity Program (GTLP), which was established to address the significant trade finance gap in these markets.
The need for such initiatives has become more pressing as global trade continues to outpace the ability of financial systems in emerging markets to support it. According to Aditya Gahlaut, Co-Head of Global Trade Solutions for HSBC in Asia Pacific, “Trade finance is the fuel that powers the global economic engine.” He emphasized that the partnership between IFC and HSBC would help ensure that much-needed trade finance reaches the right sectors, directly fueling job creation and economic growth in critical markets.
The global trade finance gap is a pressing issue, with the latest estimates placing the shortfall at around $2.5 trillion. This gap continues to hinder the ability of businesses in emerging markets to access necessary trade financing, thereby limiting their capacity to participate in global trade. With this new partnership, IFC and HSBC aim to reduce this gap and improve access to finance, which is critical for fostering sustainable growth and ensuring that developing countries remain competitive in the global marketplace.
Mohamed Gouled, IFC’s Vice President of Industries, highlighted the importance of trade finance in driving economic development, especially in emerging markets. He noted that the new facility would improve trade flows, enabling businesses to generate jobs and enhance livelihoods in regions that are vital for global supply chains.
Riccardo Puliti, IFC’s Regional Vice President for Asia Pacific, also pointed out the ongoing challenges facing emerging markets in accessing trade finance. He noted that enhancing financing opportunities for importers and exporters in these regions, particularly those with the most urgent needs, would be key to stimulating cross-border trade and boosting exports in essential industries.
Through the GTLP, IFC has already supported over $80 billion in global trade volume through nearly 30,000 transactions over the past two decades. The program has also worked with over 400 financial institutions across 74 emerging markets, including countries affected by conflict or economic instability. This latest partnership with HSBC is seen as a critical step in furthering the GTLP’s mission to address the trade finance gap and ensure businesses in developing nations have the financial resources they need to thrive.
This collaboration represents a significant step towards enhancing trade opportunities for businesses in emerging markets and facilitating sustainable economic growth in regions that will benefit most from increased trade liquidity.