5 banks enroll in ADB trade finance program

MANILA, Philippines - Five local banks have enrolled in the trade finance program of the Asian Development Bank (ADB) worth about $1 billion in loans and guaratees.

The banks are Metropolitan Bank & Trust Co., Allied Banking Corp., Development Bank of the Philippines (DBP), Philippine National Bank (PNB) and Rizal Commercial Banking Corp. (RCBC). DBP is a development-oriented government financial institution while the other four are private commercial banks.

Metrobank head of treasury and corporate planning Ferdinand Antonio A. Tansingco noted that inter-regional trade has been increasing, slowly reducing exposure to the traditional markets such as the United States.

“There is a shift in trade towards the region,” Tansingco said. “And Metrobank, like most Philippine commercial banks, have taken note by making the adjustments.”

He added that Metrobank would seriously look into the opportunities offered by joining the trade finance program of the ADB.

The Ty-led universal bank has vast businesses and banking products for domestic exporters and importers. It likewise has an extensive network of branches overseas as well as correspondence banks with foreign banks.

Earnings from trade financing for imports and exports contribute significantly to the bank’s non-interest income.

Meanwhile, PNB president and chief executive officer Omar Byron T. Mier said they would study the opportunities offered by the trade finance program. PNB also has an extensive overseas branch network, correspondent banking alliances, and a loan portfolio for exporters and importers.

Meanwhile, ADB senior investment specialist Stephen Beck said that they are expecting two more Philippine banks to join the program. Sources said ADB is still making representations with the Banco de Oro Unibank Inc. (BDO) and the Bank of the Philippine Islands (BPI).

Beck explained that the program allows banks to tap into the $1-billion fund. The program involves direct lending to banks which, in turn, will re-lend to Philippine exporters and importers. It also offers guarantees for loans extended by banks that have signed up with the program.

In addition to providing funds, the program links banks and firms in developing economies with their counterparts in other developing and developed economies. This builds relationships and spurs job-creating business opportunities and knowledge sharing that will help banks and their clients in the longer term.

Beck explained that the interest rates for loans under the program will be market-led, and will not make any distinction between government financial institutions or private banks.

ADB’s Private Sector Operations Department director general Philip Erquiaga said in the Philippines, small- and medium-sized firms employ around 77 percent of all those working in the manufacturing sector.

“If those firms can access more trade finance, they will be able to expand and employ more workers. That would boost personal incomes and help to reduce the country’s poverty levels,” Erquiaga said.

In 2009, the program provided support for $1.9 billion in trade transactions, 300 percent more than in 2008. Majority of the amount was utilized by Pakistan, Bangladesh and Vietnam, and 263 SMEs benefited from the program.