IFC scheme could boost emerging-market trade: TMB
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TMB Bank anticipates that cooperation with the International Finance Corporation (IFC) through the Global Trade Finance Programme (GTFP) will significantly strengthen trade finance activities for Thais dealing with emerging markets.
Boontuck Wungcharoen, chief executive officer of TMB, said that as a result of slower growth in the export sector – due mainly to a slowing of the economy – exporters would need to seek out new markets. However, they face the risk of their trading partners defaulting on payments. Under the GTFP, Thai exporters and importers will be assured of receiving cash, as the IFC will act as guarantor on trade-related transactions – covering payment risks for banks in emerging markets.
The IFC is part of the World Bank Group.
Healthy growth in emerging markets such as Cambodia, Laos, Malaysia and Vietnam (CLMV) is providing greater opportunities for Thai traders. TMB Bank believes the programme will add to trade volumes.
Boontuck said exporters who enter the programme would be charged a fee amounting to about 0.5 per cent of their trade volume, though the fee is likely to vary depending on the market.
Over the past four years TMB has focused on trade finance. Trade volumes of TMB clients in 2012 jumped to Bt1 trillion from Bt140 billion in 2009.
The bank expects trade volumes of its clients this year to increase by 40 per cent to Bt1.4 trillion – partly on trade volumes in emerging markets.
Piti Tantakasem, chief wholesale banking officer at TMB, said CLMV markets accounted for 9 per cent of Thai export volume, up from 5 per cent in 2011, while volumes from Thailand to European were 8 per cent.
He said the IFC had a strong network with more than 500 bank partners in 100 countries, making it convenient to facilitate the needs of its traders.
Sergio Pimenta, director of IFC East Asia and Pacific, said emerging markets were showing healthy growth and past cooperation with TMB had persuaded the IFC to seek solutions for Thai clients.
He added that the programme could help reduce risks for Thai traders during a period of slower economic growth.
Since the IFC’s inception in 2005, the GTFP has issued more than 15,000 guarantees to banks totalling US$23 billion (Bt713 billion) for trade-related payments of financial clients in emerging markets.
In fiscal 2013, the IFC provided $3.1 billion to support trade in underdeveloped countries, of which 80 per cent of all guarantees went to small and medium-sized enterprises.
