ADB creates emergency trade finance facility for Nepal by expanding its Trade Finance Programme
Asian Development Bank (ADB) is expanding its Trade Finance Programme (TFP) in Nepal by an additional $40 million to help banks finance import of much needed goods to support reconstruction and immediate needs in response to the recent earthquake.
"The emergency facility for Nepal will help remove financial constraints when companies approach their banks to import what they need for emergency assistance, rehabilitation and reconstruction," ADB’s head of Trade Finance Steven Beck said, adding that the impact of the facility can reach $80 million within a year, since trade finance is typically short term and can roll over in less than 180 days.
ADB’s Trade Finance Programme provides guarantees and loans through banks to support trade. The emergency Trade Finance Programme facility for Nepal will be implemented through four Nepali banks – Himalayan Bank, Nabil Bank, Nepal Investment Bank, and NIC Asia Bank – already participants in ADB’s Trade Finance Programme. The facility will prioritise imports of basic commodities – including food and medicine – and needs related to reconstruction, the ADB press note said.
Thousands have died following the earthquake and hundreds of thousands are unable to return home because buildings have collapsed and transport systems, including roads, are unusable. Over two-thirds of Nepal’s 75 districts are thought to have been affected by the earthquake. It will impose a huge economic toll on the country. Preliminary ADB estimates suggest that the economic growth in Nepal may decline to 4.2 per cent for the current fiscal year of 2014-15, compared to the March projection of 4.6 per cent.
ADB has established a Nepal Earthquake Response Team, which along with UN agencies and other development partners will assess the damage and long-term investment needs for reconstruction and rehabilitation.
Support for trade finance will add to the $3 million grant from the Asia-Pacific Disaster Response Fund that ADB is providing for relief efforts and the up to $200 million additional resources for projects in the first phase of rehabilitation.
The Trade Finance Programme helps fill market gaps for trade finance in developing Asia by providing guarantees and loans to banks to support trade. Backed by ADB’s AAA credit rating, the programme works with over 200 partner banks to provide companies throughout Asia and beyond with the financial support they need to engage in import and export activities.
Since 2009, the Trade Finance Programme has supported more than 6,000 small and medium-sized enterprises in about 10,000 transactions valued at over $20 billion in a wide range of sectors, from commodities and capital goods to medical supplies and consumer goods in the region’s most challenging markets.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region. In 2014, ADB assistance totaled $22.9 billion, including cofinancing of $9.2 billion.