StanChart signs $500m risk-sharing deal with Ofid

A $500 million trade-finance agreement has been signed between global bank Standard Chartered and the Organisation of Petroleum Exporting Countries Fund for International Development (Ofid), which aims to boost world trade flows for emerging market banks.

Ofid will guarantee letters of credit (LCs) issued by banks in developing countries, and Standard Chartered will confirm the LCs and act as risk originator.

The programme involves the two parties equally sharing the payment risk of a deal that takes place between an exporter and an importer. It is estimated the programme will generate incremental trade of more than $2 billion.

According to Geoff Parry, global head of trade asset management at Standard Chartered, the deal is designed to inject credit capacity where it is needed into the trade finance market. "We believe this is important because there is a lot in the press at the moment about the lack of trade financing available, particularly in the developing markets," he says.

Standard Chartered and Ofid have pre-agreed the types of deals that will qualify for the programme, meaning transactions can be automatically confirmed. Parry says this element is a crucial advantage point. "Importers and exporters need a yes or no on a deal instantaneously, a few hours can make all the difference," he adds.

Standard Chartered has signed similar agreements with other multilateral partners this year, including a deal with the International Finance Corporation, a member of the World Bank.