RAWALPINDI, Oct 22: Pakistan will be the first country where the Asian Development Bank plans to launch its Trade Finance Facilitation Programme (TFFP), aimed at attracting private capital to support development in the poorest countries of Asia.

The programme works with private-sector financial institutions to support trade in developing countries by sharing the risk of financing and guaranteeing trade transactions.

These types of risk sharing agreements can be particularly important in developing intraregional trade between smaller developing countries, and in supporting growth of small and medium-sized enterprises (SMEs) involved in international trade.

The Asian Development Bank and the Sumitomo Mitsui Bank Corp (SMBC) announced on Wednesday that they have entered into a risk-sharing agreement that will enhance support for international trade in the developing countries of Asia.

The will broaden SMBC’s risk mitigation capabilities and enhance profile of the underlying trade finance transactions as SMBC would be able to benefit from ADB’s ‘AAA’ credit rating, said an ADB announcement on Wednesday. The programme will assist not only local banks in Asian countries that have been slow to integrate with the global trading system, but can also help maintain, reestablish and enhance trade finance lines for local banks hurt by political or systemic crises.

The programme will be introduced in phases. Phase-I would be launched in Pakistan and Sri Lanka while phase-II will extend coverage to include financial institutions in Cambodia, Lao Republic, Mongolia, Philippines and Viet Nam.

The programme will enable both SMBC and ADB to continue facilitating the growth of trade business in these countries as well as strengthen relationships with financial institution clients.

TFFP plays an important role in ADB’s efforts to develop public -private partnerships through risk mitigation.

The programme aims to help develop member countries’ banks provide trade finance products to private sector importers and exporters.

This is a means to facilitate international trade to, from, and between DMCs.

The TFFP develops the capabilities of local issuing banks. It has two main components which include revolving guarantee facility, without sovereign counter-guarantee, under which ADB guarantees payment to participating regional and international confirming banks, covering commercial and political risks.