The governments of Malta, Mauritius, India and Sri Lanka – together with the Commonwealth to which they belong – have unveiled a new trade-finance resource for developing nations.
Aiming to attract start-up capital of $20m, the Commonwealth Trade Finance Facility was launched in Malta with the signatures of Joseph Muscat, the nation’s prime minister, and foreign secretary George Vella.
They were joined by Mauritius’ minister of foreign affairs Etienne Sinatambou, his Sri Lankan counterpart, Mangala Pinsiri Samaraweer, and Indian minister of state for external affairs VK Singh.
At the launch event, Muscat and Commonwealth secretary-general Kamalesh Sharma presented a Declaration of Intent, ensuring that the new facility has the full backing of the Commonwealth organisation.
“We are acting as facilitators,” Muscat explained, “so that small traders in small jurisdictions can penetrate new markets. We are very keen to create necessary trade infrastructure for ourselves and other, small Commonwealth countries.”
However, Sharma added, the partners behind the scheme are awaiting the go-ahead from several financial institutions before it can start allocating funds. “Four countries have signed the Declaration as anchor investors – it is now a commercial fact,” he said. “We just need to get back to the banks to make it operational.”
Structured as a guarantee fund, the Facility will cover risk for trade-credit providers in Commonwealth countries, stimulating lending channels from major banks to smaller banks in member states.
Malta will host the Facility and manage its governance structure, providing oversight for contributing member countries. In terms of day-to-day logistics, it will be run by commercial banks using a set of existing trade-finance instruments and operating infrastructures.
The first phase of the fund will run over three years, followed by a review. Current estimates indicate that for every dollar invested, the fund will generate $20.
Speaking to Global Trade Review, Commonwealth media representative Hannah Murphy, said that the 1:20 ratio implies the Facility “is potentially able to generate additional trade of $400m annually”.