26 Nov 2015
- The Commonwealth and the Government of Malta, together with the
Governments of Mauritius, Sri Lanka and India announced today a new
trade financing fund to help boost trade and investment flows,
particularly for small and developing countries.
The
voluntary fund hopes to attract start-up capital of $20 million. It
will provide member countries facing trade challenges with the finance
they need to increase their trade capacity. It is estimated for every
dollar invested, the fund will generate $20.
At
a press conference, The Prime Minister of Malta, Joseph Muscat and
Commonwealth Secretary-General, Kamalesh Sharma presented a declaration of intent to support the Commonwealth Trade Financing Facility.
“We
are acting as facilitators so 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,”
said Dr Muscat.
The declaration
was signed today by Malta’s Minister of Foreign Affairs, George Vella;
Mauritius’ Minister of Foreign Affairs, Etienne Sinatambou; Sri Lanka’s
Minister of Foreign Affairs Mangala Pinsiri Samaraweer and Indian
Minister of State for External Affairs, V.K. Singh.
“Four countries have signed the declaration
as anchor investors. It is now a commercial fact. We just need to get
back to the banks to make it operational,” said the Secretary-General.
The
Facility, structured as a guarantee fund, will cover risk for providers
of trade credit in financial institutions of Commonwealth countries. It
seeks to stimulate lending by major banks to smaller banks in member
states and reduce risk.
Financial
investment will be sought from member countries and other parties that
have expressed an interest in participating. The first phase of the fund
will run over three years followed by a review.
Malta
will host the Facility and manage its governance structure, providing
oversight for contributing member countries. It will be operated by
commercial banks using existing trade finance instruments, payments
arrangements and operating infrastructures.
The
initiative is the result of a mandate issued at the 2013 Commonwealth
leaders’ summit to help small and developing Commonwealth countries
increase their trade capacity. Heads of government welcomed a proposal
developed by the Commonwealth Secretariat and the Government of Malta to
launch a pilot among interested members.
A
working group carried out a scoping exercise, which took into account
existing trade financing agencies and other sources of trade finance,
including those offered by multilateral and regional programmes.
Findings demonstrated a need for the fund.