An innovative way for the Commonwealth Small States to have easier access to international trade finance was launched at the Commonwealth Heads of Government Meeting in London this week. The scheme, called the Commonwealth Small States Trade Finance Facility, will be managed by the Standard Chartered Bank and the Bank of Baroda. An initial capital of $5 million was provided by India, Sri Lanka, Mauritius and Malta.
The Commonwealth Secretariat will effectively act as a guarantor on loans secured to develop trade and sustain economic and social development. This guarantee could release $100 million of incremental trade finance over a three-year period to any of the 31 Commonwealth nations classified as small states.
Africa: Botswana, Lesotho, Mauritius, Namibia, Seychelles and Swaziland.
The Caribbean and the Americas: Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Trinidad and Tobago.
Europe: Cyprus, Malta.
Pacific: Brunei Darussalam, Fiji, Kiribati, Nauru, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, Vanuatu.
The Commonwealth’s Secretary-General, Patricia Scotland, said of the scheme;
“This new scheme is an example of the innovative and collaborative approaches that are pioneered by the Commonwealth; they have a hugely positive impact on the lives and livelihoods of people in our smaller and more vulnerable member countries.
“Without such a scheme, small states find it difficult to access the funds they need to diversify their economies and build inclusive prosperity by expanding trade. This impairs their ability to achieve the Sustainable Development Goals.”
The trade finance facility developed by a working group including the International Finance Corporation, Government of Malta, Central Bank of Malta, Export-Import Bank of India and the Commonwealth Secretariat has been five years in the making. The working group developed a mechanism in the form of a guarantee facility, that will encourage international banks to offer higher trade finance lines to financial institutions in the small states by reducing their credit risk.
The concept is based on the highly innovative use of blended finance that seeks to achieve maximum impact with minimal levels of official assistance. The facility is hosted and administered by Malta. Pilot countries selected for the spring launch include The Bahamas, Botswana, Brunei, Dominica, Fiji, Mauritius, Namibia and Seychelles.
Source: The Botswana Government Facebook page