An idea mooted by the Export-Import Bank of
India (Exim Bank) was formalized during the recently concluded Commonwealth
Heads of Government Meeting (CHOGM) in London, says an Exim Bank release.
Commonwealth Small States Trade Finance Facility (CSSTFF), conceptualized by
Exim Bank, was signed during CHOGM-2018, also attended by the Hon’ble Prime
Minister of India. CSSTFF is expected to substantially increase the
availability of short-term credit (trade finance) for the Commonwealth member
states which are mostly dependent on imports.
Of the 53 Commonwealth member countries, 31
are small island states mainly in the Caribbean and the Pacific region. These
island states lack scale and are not self-sufficient economies, needing to
import most items including consumables. With the heightened risk perception on
banks since the financial crisis, especially small banks in developing
countries, and the Basel regulations on capital requirements, trade finance has
become scarce. The CSSTFF addresses this constraint to ensure that trade flows
are not hindered to these small island states.
The Commonwealth Secretariat, London, had
appointed Exim Bank to prepare a pre-feasibility report for setting up of a
trade finance facility. Based on the recommendations of Exim Bank, the
Commonwealth Secretariat constituted a Working Group comprising Exim Bank,
International Finance Corporation-Washington and the Central Bank of Malta (the
facility was to be housed in Malta).
The CSSTFF will be managed by commercial
banks as they will take exposure on select banks in the small states (depending
on their risk profile) to support trade transactions. The commercial banks will
in turn mitigate their risk by seeking protection of first loss from the common
pool of CSSTFF in the event of default by any of these banks in the small
states.Exim Bank played a decisive leadership role in the setting up of the
CSSTFF and has earned appreciation from the Commonwealth fraternity for the
sharing of its expertise and for institution-building, the first of its kind in
When Exim Bank was set-up in 1982, there was
no Export Credit Agency (ECA) role model in any developing country, as till
then, ECA was mostly a developed country phenomenon. Due to this, Exim Bank had
to carve out its own strategy and product / service offerings, which has since
been emulated by many other ECAs in other developing countries. As a result,
the Bank has been engaged as a consultant by various countries like Malaysia,
Turkey, Sri Lanka, South Africa, Nigeria and Rwanda. At present, Exim Bank is
engaged in consultancy assignments with the Sri Lanka Export Credit Insurance
Company and the Ghana Exim Bank.