Trade finance of agro commodities in Europe
13/06/2019
Trade finance is financing related to the maintenance of export-import operations. Here we observe main providers of agricultural trade finance which could be divided into 4 main groups:
  1. International finanacial organizations
  2. Agro commodities traders
  3. Export credit agencies
  4. Trade finance banks
International financial organizations, which provide trade finance services
  • IFC: The Global Trade Finance Program (GTFP) extends and complements the capacity of banks to deliver trade financing by providing risk mitigation in new or challenging markets where trade lines may be constrained. GTFP offers confirming banks partial or full guarantees covering payment risk on banks in emerging markets for trade related transactions. These guarantees are transaction-specific and may be evidenced by a variety of underlying instruments such as: letters of credit, trade-related promissory notes, accepted drafts, bills of exchange, guarantees, bid and performance bonds and advance payment guarantees. The guarantees are available for all private sector trade transactions that meet IFC's criteria.
  • EBRR: The European Bank for Reconstruction and Development's (EBRD) Trade Facilitation Programme has been running since 1999 and has been the recipient of numerous awards. The programme aims to promote foreign trade to, from and amongst the EBRD countries of operations and offers a range of products to facilitate this trade. Through the programme the EBRD provides guarantees to international confirming banks, taking the political and commercial payment risk of international trade transactions undertaken by banks in the countries of operations (the issuing banks).
  • Black Sea Trade and Development Bank: The Black Sea Trade and Development Bank (BSTDB) is international financial institution serving its eleven member countries that are founding members of the Black Sea Economic Cooperation, a regional economic organization. It supports economic development and regional cooperation by providing loans, guarantees, and equity for development projects and trade transactions. It also provides credit guarantee funds, microfinance, venture capital-equity investment funds, leasing, and credit lines for small and medium enterprises; special funds for technical assistance.
  • Asian Development Bank: The Asian Development Bank is a regional development bank, which admits the members of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP, formerly the Economic Commission for Asia and the Far East or ECAFE) and non-regional developed countries. From 31 members at its establishment, ADB now has 68 members, of which 49 are from within Asia and the Pacific and 19 from outside. ADB's Trade Finance Program (TFP) fills market gaps for trade finance by providing guarantees and loans to banks to support trade. The program supports a wide range of transactions, from commodities and capital goods to medical supplies and consumer goods.
  • International Investment Bank: The International Investment Bank (IIB) is a multilateral institution for development, which supports of the small and medium-sized businesses and takes participation in financing socially significant infrastructure projects. The TFSP can be used to guarantee export/import transactions between IIB Member States and other countries. The following instruments may be provided by IIB under the Programme: 1. Irrevocable Reimbursement Undertakings. 2. Irrevocable Banking Guarantees/SBLCs. 3. Counter-guarantees. 4. Revolving credit facility.
  • OPEC Fund for International Development: OFID’s private sector and trade finance operations windows are a complementary means for OFID to fulfil its core mission of assisting partner countries in their socioeconomic development. Through trade finance, OFID supports private enterprises and governments by facilitating their import and export requirements. The Private Sector and Trade Financing windows have a global remit, supporting projects and companies in over 60 countries across Africa, Asia, Latin America and Europe.
  • EIB Trade Finance Facility: The Trade Finance Facility for Greece is the EIB’s first ever trade finance facility. Under this new instrument we are providing EUR 500m in guarantees for foreign banks covering 85% of their risk vis-à-vis their Greek counterparts for letters of credit and other trade finance instruments, to mitigate the risks of non-payment and default.
  • Euler Hermes: Euler Hermes is a credit insurance company and subsidiary of Allianz SE. The Transactional Cover Solutions comprise various tailor-made insurance options that can address the risks of three client groups: financial institutions that offer trade and export finance, corporate entities that seek to invest into assets overseas, multinational companies that seek insurance for import or export transactions. The company offers a wide range of bonding, guarantees and collections services for the management of business-to-business trade receivables.
  • Berne Union: The Berne Union, also known as The International Union of Credit & Investment Insurers, is an international non-profit association and community for the global export credit and investment insurance industry. In 2018, Berne Union members provided USD 2.5 trillion of payment risk protection to banks, exporters and investors - equivalent to 13% of world cross border trade for goods and services (calculated with respect to WTO statistics).
European Export credit agencies
Export credit agency (ECA) is a specialist financial institution that offers financing for domestic companies’ international exportation facilities. Export Credit agencies structure there financing through the provision of specific loans and insurance that cater for non-conventional risks such as overseas commercial liabilities, political risk etc. These agencies permit further investment flows through the effective transactional fluidity concerning international trade, subsequently, there is no fixed model for export credit agencies furthermore some agencies are partly controlled by government departments and some are privately owned brokerages
Export credit agencies principally utilize three methods to provide funds to an importing entity:
  • Direct lending, which is the simplest structure whereby the loan is conditioned upon the purchase of goods or services from businesses in the organizing country.
  • Financial Intermediary Loans, where the export–import bank lends funds to a financial intermediary, such as a commercial bank, that in turn loans the funds to the importing entity.
  • Interest rate equalization: Under interest rate equalization, a commercial lender provides a loan to the importing entity at below market interest rates, and in turn receives compensation from the export–import bank for the difference between the below-market rate and the commercial rate.
CountryName of ECA
AustriaOeKB
BelgiumCredendo (OeKB)
Czech RepublicEGAP
DenmarkEKE
EstoniaKREDEX
FinlandFINNVERA
FranceBPI FRANCE
GermanyEULER HERMES
GreeceECI
HungaryEXIM
ItalySACE
LatviaLVA
LuxembourgODL
NetherlandsATRADIUS
NorwayEKSPORT KREDIT
PolandKUKE
PortugalCOSEC
Slovak RepublicEXIMBANKA SR
SpainSID BANKA
SwedenEKN
SwedenSEK
SwitzerlandSERV
TurkeyTürk Eximbank
UKUK EXPORT FINANCE