KATHMANDU: The Asian Development Bank (ADB) has expanded its trade finance programme (TFP) in Nepal by $40 million in order to help local banks finance the import of goods needed for reconstruction and immediate relief in the wake of 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” says Steven Beck, ADB’s head of trade finance.
“Since trade finance is typically short term and can roll over in less than 180 days, the impact of this facility can reach $80 million within a year.” ADB’s TFP provides guarantees and loans thorugh banks to support trade. The emergency TFP facility for Nepal will be implemented through a number of Nepali banks which are already participants in the ADB – namely, Nepal Investment Bank, Himalayan Bank, Nabil Bank, NIC Asia Bank.
The facility will prioritise the import of basic commodities including food and medicine, along with needs related to reconstruction. The recent move comes after ADB 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.
The 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. Preliminary ADB estimates suggest that the economic growth in Nepal may decline to 4.2% for the fiscal year of 2014-2015, compared to the March projection of 4.6%. The TFP helps to 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 200-, the TFP has supported more than 6000 small and medium-sized enterprises in about 10,000 transactions valued at over $20 billion in total.
