Standard Chartered Risk Sharing Facility

Economic enabler: CDC has provided a risk-share arrangement so that SCB can extend more foreign currency trade credit to regional and domestic banks and sustain higher trade volumes than the bank can support without CDC’s support. This will enable businesses to import the commodities and equipment they need to sustain business operations, market output and contribution to GDP, ultimately leading to job/livelihood retention and the continued or increased availability of goods in the market.

Across Africa and South Asia. Since 2015, approximately 50 per cent of CDC’s trade participation under this facility has been in category ‘A’ and ‘B’ countries, e.g. Pakistan, Nigeria and Nepal. The remaining has been in category ‘C’ countries such as Kenya and Egypt.

Given the variance of industries in which the businesses operate, for characteristics of people who ultimately benefit from the enabled trades, we assume mass market characteristics and demographics of the respective geographies.

It is not possible to state the number of people who will be reached, so we use the scale of the facility and enabled trade as a proxy. Based on assumptions related to average tenor and utilisation, we anticipate that the $500 million facility will enable up to $800 million in additional trade volumes per year.

The World Bank recently adjusted growth projections for Africa from 2.4 per cent in 2019 to -2.1 to -5.1 per cent in 2020. For South Asia, regional growth has been estimated to fall to 1.8-2.8 per cent in 2020, down from 6.3 per cent projected six months earlier. As a result, impact is expected to be deeper in a context where the counterfactual has worsened (i.e. lower household welfare due to higher rates of unemployment and lower access to goods/services as a result of the COVID-19 crisis).

• Financial additionality: Commercial funding is not available in these structures in sufficient volumes in the markets where we invest. Particularly in the current COVID-19 context, there is increased retrenchment of capital, making commercial investors less willing and/or able to support African banks.
• Value additionality: We are offering preferential terms, e.g. increased risk share or longer tenors, for the least developed countries and COVID-19 priority sectors such as food and healthcare commodities to help support trade flows in essential goods.

3.25

Market context: The global trade finance gap is estimated to be $1.5 trillion, and the average unmet demand in Africa represents 5.5 per cent or $91 billion

Evidence Risk

• Visibility on the impact on ultimate borrowers depends on SCB and the local banks’ ability to provide data on underlying borrowers. SCB provides monthly data on underlying trades financed through the facility, including information on country, sector and a description of goods. We mostly rely on theory, evidence and macro trade data to understand the indirect impact of trade on capital markets, economies and people.

External Risk

• There may not be enough demand and/or other trade constraints could be hindering the ultimate impact to occur (e.g. logistical, trade policy).