Trade finance and beyond

The Asian Development Bank's Trade and Supply Chain Finance Program (TSCFP) plays a crucial role in Pakistan by addressing economic challenges, such as power shortages, high inflation, weak foreign currency reserves, and balance of payment issues. Yong Ye, ADB Country Director for Pakistan talks about the role of TSCFP in ensuring trade and business continuity in the country.

Q: What does ADB's Trade and Supply Chain Finance Program (TSCFP) do, particularly in Pakistan?

A: The Trade and Supply Chain Finance Program (TSCFP) is part of ADB’s Private Sector Operations and helps ADB member countries by closing market gaps through guarantees, products, loans, and knowledge.

Pakistan is facing multifaceted economic challenges. The country’s difficulties are compounded by chronic power shortages, high inflation, its weak foreign currency reserves, and balance of payment issues. Given these circumstances, ADB’s trade finance support, by extending timely guarantees, enables the country’s commercial banks to carry out vital transactions that support business and trade, along with vital imports and exports. This helps create sustainable jobs and economic growth.

Q: What has the TSCFP achieved to date in Pakistan?

A: Currently ADB’s TSCFP works with 13 banks in Pakistan to support international trade. In 2022, the TSCFP continued support through 651 transactions valued at $2.4 billion. There has been a total of $22.1 billion in support from the TSCFP since 2008. Co-financing is an important element of TSCFP’s operations in Pakistan; $12.1 billion of the $22.1 billion in trade supported through the TSCFP was co-financed by the private sector.

Q: How does ADB's Trade and Supply Chain Finance Program (TSCFP) work?

A: The TSCFP has two main types of activity. First, it provides guarantees and loans, mobilizing significant amounts of private sector financing to help close trade financing gaps. Secondly, the TSCFP delivers knowledge products, services, and solutions to make global trade greener and more resilient, inclusive, transparent, and socially responsible.

Backed by its AAA credit rating, ADB’s TSCFP works with over 200 partner banks, including 13 in Pakistan. It is helping to provide companies with the financial support they need to engage in import and export transactions in some of Asia’s most challenging markets.

Q: What are the key areas the TSCFP focuses on in Pakistan?

A: The TSCFP focuses its support on essential goods for energy, food security, and pharmaceuticals. This includes the import of cotton, essential for textile production, one of Pakistan’s most important exports. The TSCFP has assisted Pakistani banks to become more resilient to external shocks, such as the recent devastating floods. The program has also made significant contributions to meeting oil import demands in 2022, as the country struggled to cope with a massive power crisis.

Some of the guaranteed funds from the TSCFP facilitate the import of essential items, such as medicines, chemicals, and fertilizer. It is also helping local importers and banks to secure confirmed letters of credit from international lenders.

Q: What else does the TSCFP do in Pakistan?

A: The TSCFP has been leading a global effort to promote trade transparency, including combating trade-based money laundering (TBML). The program working with the Pakistan Financial Monitoring Unit (FMU), customs, and law enforcement agencies in a TBML pilot project that aims to improve the reporting of suspicious trade transactions.

As a part of this pilot, the TSCFP has recently co-organized with the FMU a two-day TBML workshop in Karachi and Islamabad in May 2023, attended by over 190 participants from both the public and private sectors. In addition, the TSCFP has provided certification courses to 59 bankers through the Association of Certified Anti-Money Laundering Specialists (ACAMS) certification. Also, 30 banks were provided with trade finance related certification by the International Chamber of Commerce (ICC) Academy.

To enhance support for small and medium-sized enterprises, in 2021 the TSCFP organised a series of webinars on Supply Chain Finance in partnership with the State Bank of Pakistan. The workshop shared knowledge and international best practice in managing credit and legal risk and the importance of building strong IT systems for supply chain finance. The TSCFP recently signed a Technical Assistance Agreement with Askari Bank wherein ADB will review the bank’s supply chain finance program with a view to making the program more scalable.