Standard Chartered has signed a $500 million risk-sharing programme with the Opec Fund for International Development (OFID).

OFID will guarantee letters of credit (LC) issued by banks in developing countries to support trade transactions of local corporates. Standard Chartered Bank will confirm the LCs and act as the risk originator.

The risk participation programme is for $500 million, split equally between the two partners. It is estimated that the programme will generate incremental trade in excess of $2 billion.

The signing took place during the 2009 Annual Meeting of the World Bank Group in Istanbul. Karen Fawcett, Group head of Transaction Banking, signed for Standard Chartered and Suleiman J. Al-Herbish, director-general, signed for OFID.

“The programme directly supports the growth of world trade flows by providing incremental trade finance credit capacity for emerging markets banks – importantly replacing loss credit lines,” said Fawcett. “We aim for importers and exporters to do more business and for new trading partnerships to be forged.”

Although aimed at stimulating trade originating from developing countries, the framework agreement is viewed as string business for Standard Chartered as it allows the bank to utilise its global network and strong relationships with LC-issuing banks and emerging market corporates.

As a top trade bank, Standard Chartered has been able to leverage its extensive inhouse risk distribution capabilities, she noted.

According to Fawcett, Standard Chartered has signed similar agreements with other multilateral partners in 2009.

“There is strong alignment between our two organisations. As well as encouraging trade with developing economies, OFID’s mandate is to provide financial support through various activities to assist the developing countries in their economic and social development,' she said.

'These activities align well with the high standards Standard Chartered sets itself with respect to social responsibility, sustainability and commitment to addressing the longer-term challenges the world faces.”

In support of the agreed co-operation, Al-Herbish said, “OFID is aware that trade finance is a core business of the SCB Group and we are pleased that its geographical footprint in Asia, Middle East and Africa, coincides well with OFID’s mandate.'

'Through this agreement, OFID is providing an additional finance mechanism to assist partner countries with their overall growth and economic development. The risk-sharing agreement we have concluded with SCB is most certainly a building block in the architecture of this facility,' he added.-TradeArabia News Service