ImpactAlpha, November 18 – To help restart cross-border commerce in emerging markets, U.K. development finance institution CDC Group is committing $100 million to Standard Chartered bank to on-lend to local banks financing small businesses. The liquidity-boosting trade financing will help small-scale exporters cover production and shipping costs and importers pay for their orders. CDC’s goal is to keep essential food and health products moving to areas of Africa and Asia, where small businesses face a liquidity crunch caused by lockdowns and border closures.
For impact investors in need of lower-risk opportunities, trade finance is “just the ticket,” say CDC’s Yasemin Saltuk Lemy and Diana Kolar, “exactly the type of support businesses need to maintain operations and jobs without jeopardizing financial health by taking on leverage or diluting ownership during a crisis.” (See, “Trade finance provides ‘systemic liquidity’”).
The latest deal marks an expansion of CDC’s two-year partnership with Standard Chartered, which assumes 50% of the lending risk.
CDC has guaranteed $3.3 billion in trade financing deals since 2015, including $600 million in March 2020 alone, when country lockdowns went into effect. In addition to Standard Chartered, it has trade finance partnerships with Société Générale and Absa (see, “CDC Group backs Africa’s banks to ratchet up small business finance”).