Over the past decade, the International Finance Corporation's short-term finance programme has facilitated billions of dollars of trade finance, and the programme's Americas head, Antonio Alves, is confident about its continued success.

The World Bank’s International Finance Corporation (IFC) started its short term-finance programme in 2004, taking inspiration from the success of an earlier programme by the European Bank for Reconstruction and Development, says Antonio Alves, head of the IFC’s short-term finance for the Americas. Until then, the corporation had mainly dealt with project and longer term finance and Mr Alves was the first, and for a long time only, employee to work on the initiative, which initially focused solely on trade finance in Africa.

Mr Alves joined the IFC after completing a masters in business administration at HEC School of Management in Paris and a short career in banking in Brazil, his home country. “The IFC was looking for someone with language skills – Portuguese, French and English – to start the short-term finance department,” says Mr Alves. “I had no staff, I was based in Washington, DC, and travelling three weeks every month across Africa, often needing to fly through Europe as there were almost no internal connections. Some of the countries I visited were dealing with post-conflict issues.”

The challenges were big, but so was the satisfaction of creating a new business that proved to be highly successful, says Mr Alves. Within two years, the initiative provided support for $400m-worth of trade finance deals; 10 years later, the global trade finance programme (GTFP) generates much larger business volumes. In 2013 alone, it supported $22bn-worth of trade financing deals, $7bn of which were in the form of direct financing.

By covering payment risk of emerging market banks in relation to trade finance deals, the corporation helps them to build relationships with international lenders. Of the total 550 banks part of the GFTP, 250 are so-called ‘issuing banks’, which request the IFC support and are mainly based in emerging markets, and 300 are ‘confirming banks’, which grant credit and are mainly based in developed countries.

When Mr Alves took the trade finance programme to Latin America in 2007, the IFC wanted to work with Brazilian lenders first. Until then, it had dealt with the largest players in the country, but it was the smaller ones that needed its support. Banks such as Itaú, Unibanco (then two separate lenders) or Bradesco would not benefit from GTFP as they already had well-established international relations and access to low-priced funding.

Banco Daycoval was one the first small to mid-sized banks to join the programme, which proved very helpful: “[Recently, at the latest] Inter-American Development Bank’s annual meeting, a senior manager at Daycoval told me, ‘you have introduced me to so many contacts, have opened so many doors, that now when the market is good, I don’t need your support as much',” notes Mr Alves. “[The IFC] acts almost like a broker. Once we do the first transaction, say between a bank in Asia and a bank in Brazil, the bank in Asia would [usually] get comfortable with the risk of the bank in Brazil, and they would then approve a line straight with the bank, without the IFC involvement.”

Mr Alves hopes that more issuing banks will establish international relations independently from the IFC as this would be the ultimate validation of the programme’s effectiveness. He also hopes to grow the other initiatives part of the IFC’s short-term finance solutions in Latin America, such as warehouse financing and supply-chain finance.

Overall, given the current economic and political turmoil in Latin America, Mr Alves is confident that demand for IFC’s short-term finance support will remain strong. “There will be elections in Panama and Brazil this year, and in Argentina next year; political change reflects on financial markets, for good or for bad. So we’ll have new banks coming to the [short-term finance] programme [asking for support] because the situation has changed. I expect a very big growth for the programme in the future.”

 

PLEASE ENTER YOUR DETAILS TO WATCH THIS VIDEO

All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker



For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Join our community

The Banker on Twitter