ADB Offers Trade Finance Facilities to Sri Lankan Banks. Bank of Ceylon, DFCC Vardhana Bank Limited and NDB Bank Plc signs Agreements

09th December 2009, www.dailymirror.lk

The Asian Development Bank (ADB) yesterday signed new trade financing agreements with Bank of Ceylon, DFCC Vardhana Bank Limited, and NDB Bank Plc.

The agreements are part of ADB's Trade Finance Facilitation Program (TFFP) and will give the banks additional room to provide essential financing to Sri Lanka's exporters and importers. At the same time, the agreements will help the banks develop relationships with their international peers, which should promote partnerships and knowledge sharing in the future.

Bank of Ceylon Plc signed its first agreement under the program while DFCC Vardhana Bank Limited and NDB Bank Plc expanded their existing relationships with ADB.

Trade finance is less risky than many other forms of lending because it carries shorter maturities and supports the transfer of tangible goods. Nevertheless, companies in emerging markets, particularly small and medium-sized firms, have typically faced difficulties in accessing enough credit to fill export orders or get the goods they need from overseas.

The TFFP addresses this challenge by working with international and local banks to provide the support they require to ensure their importing and exporting clients get the loans and guarantees they need to do business.

"Trade is a key tool for promoting economic expansion. Stronger economic growth translates into jobs and higher incomes which, in turn, help to reduce poverty," said Philip Erquiaga, Director General of ADB's Private Sector Operations Department.

ADB's Asian Development Outlook 2009 Update, released in September, forecast Sri Lanka's economy would grow 4% this year and 6% in 2010. At the same time, the report predicts the country to have a current account deficit of 3% of gross domestic product this year and a 5% shortfall next year.

"Sri Lanka's banks and companies will benefit enormously from greater access to international trading and banking networks as the Sri Lankan economy emerges from the turmoil of a conflict that has restrained investment and growth for several decades," said Robert van Zwieten, Director of ADB's Private Sector Capital Markets Division, of which the trade finance program is a part.

Under the $1 billion TFFP, which began operating in 2004 and was expanded earlier this year, ADB provides finance and guarantees through and in conjunction with international and developing member country banks to support trade deals in developing countries. Since trade finance can roll over and as the program attracts private-sector support, the program can provide $3 billion in finance every year.