CDC Group, the UK’s development finance institution and impact investor, has announced the close of a $30 million trade finance loan to City Bank.
The loan facility will provide systemic liquidity that will support continued import and export activities and help bolster the country’s economic growth.
CDC’s investment will enable City Bank to extend foreign currency trade credit to local banks as well as local importing and exporting businesses, and is expected to generate up to US$100 million of additional trade every year. The loan will strengthen City Bank’s ability to meet the needs of its over 17 million clients across retail and small and medium enterprises (SMEs), facilitating increased trade and supporting key sectors of Bangladesh’s economy such as the ready-made garment, manufacturing and food processing and production industries.
Trade is an essential driver of Bangladesh’s export-oriented market. With almost all trade imports denominated in USD, stable sources of short-term funding are essential to ensure that demand for financing trade can be met. Local banks often face a difficulty in accessing short-term funding and in recent months, the COVID-19 pandemic has further tightened access to foreign currency funding on appropriate terms. CDC’s loan facility aims to close the gap by providing a stable source of trade finance funding that will keep trade flowing across the country and support Bangladesh’s economic development.
With a trade deficit and a decline in import hampering the growth of the economy, the loan facility will provide much-needed dollar supply to stimulate Bangladeshi trade. The partnership will play a crucial role in restoring economic activities in the country and supporting its post-crisis recovery.
Rehan Rashid, Country Director for Bangladesh, CDC Group, said: “This loan to City Bank, which marks CDC’s first direct trade finance loan to a local issuing bank, will further enhance the supply of trade finance in the region. We are thrilled that this commitment will support Bangladesh’s banking sector and enhance our ability to bring deeper impact to local and regional value chains. CDC is committed to offering patient and stable trade finance funding that will facilitate continued supply of goods and services – helping Bangladeshi businesses grow and remain resilient throughout and beyond the Covid-19 pandemic.”
Sheikh Mohammad Maroof, Additional Managing Director at City Bank, said: “This loan from CDC will help facilitate trade finance through UPAS LCs which in turn, will enable corporates and SMEs to optimize working capital management at competitive rates during such unprecedented times. City Bank will assist Bangladeshi businesses in meeting exporters’ requirements of payment at sight and, clients’ needs for timely goods receipt while enhancing overall competitiveness in international commercial activities. We are very excited for this new beginning and look forward to a stronger relationship with CDC in near future.”
Robert Chatterton Dickson, The British High Commissioner to Bangladesh, welcomed CDC’s first ever direct trade finance loan to a bank in Bangladesh. He said: “This transaction is a significant step forward in the UK-Bangladesh economic partnership, further broadening our offer of financing instruments beyond grant finance.” He added, “CDC’s growing presence in Bangladesh will offer an additional source of financing to the private sector, bolstering economic growth and the shared prosperity of both the UK and Bangladesh.”
CDC is the UK Government’s bilateral development finance institution. CDC’s investment in the UK is on top of the UK Government’s support for economic development in Bangladesh through the UKAid, GuarantCo, UKEF and share in International Finance Institutions’ investments in Bangladesh.
