The Multilateral Investment Guarantee Agency (Miga) is adding a new sovereign-backed guarantee capability to the International Finance Corporation’s global trade finance programme, with an initial US$500mn in capacity to be deployed on a facility-by-facility basis.
The move brings Miga into its sister organisation’s Global Trade Liquidity Program – which supports trade in low- and middle-income countries through risk-sharing facilities with both global and regional commercial banks – for the first time.
HSBC is the first bank approved under the new framework. A Miga spokesperson said they could not comment on other prospective lenders.
Extending the programme’s coverage to state-owned banks also represents a significant expansion of its previous scope and will “help to narrow the global trade finance gap”, said the World Bank Group, of which both IFC and Miga are members.
The initiative has facilitated more than US$103bn in global trade volume since its launch in 2009, according to the World Bank, supporting over 400 financial institutions across 75 emerging markets.
Under the new framework, Miga is providing up to US$500mn in guarantees on a facility-by-facility basis to cover non-payment risk on trade transactions by eligible state-owned counterparties.
The guarantees are expected to support transactions across different regions, focusing on emerging markets and developing economies that are Miga member countries.
“Facilitating the flow of trade, particularly during times of global instability, is essential to protecting economic resilience, livelihoods and jobs in developing countries, which makes this collaboration to expand the suite of guarantees offered… so critical,” said Miga managing director Tsutomu Yamamoto.
Meanwhile, former UK chief secretary to the Treasury and now CEO of infrastructure finance and sustainability at HSBC, Danny Alexander, said the new framework was a “practical step to narrow the trade finance gap by enabling more risk-sharing with eligible state-owned banks”.
Last year, the British bank facilitated around US$900bn in trade, it said.
“By combining the World Bank Group’s guarantee capabilities with HSBC’s global trade network, we can support more transactions, strengthen trade, and help drive more resilient economies where it matters most,” he said.
IFC managing director Makhtar Diop added the partnership would help unlock working capital for businesses, particularly across emerging markets, that continue to face severe constraints in accessing trade and supply chain finance.
