The Commonwealth Small States Trade Finance Facility has become operational. Its supervisory board met for the first time today, in Malta. The Facility can now begin work to increase trade and investment flows for the 31 small states of the Commonwealth.
The board will oversee governance of the facility and monitor the disbursement of loans to boost trade in Commonwealth small states. The first loan is expected to be released in December by the Facility’s managers, Standard Chartered Bank and the Bank of Baroda.
The Facility was launched at the Commonwealth Heads of Government Meeting in April and pledges were received from India, Sri Lanka, Mauritius and Malta to provide blended finance support totalling $5 million to a guarantee fund.
Opening the meeting, Secretary-General Scotland described the Commonwealth as a pioneer in devising new forms of financing to help member countries achieve development goals. “The innovative nature of the facility in providing blended trade finance, and as a fine example of South-South cooperation, make it a flagship for Commonwealth collaboration and practical action,” she said.
The Facility’s managers have signed risk protection agreements to address trade limitations associated with small states such as low volumes, higher risk perceptions and increased regulatory costs. These agreements will build confidence and enable international banks to lend more money to financial institutions in small states. During the initial three-year period, small states will have access to up to $300 million in incremental trade finance.
At the meeting, Malta’s Minister for the Economy, Investment and Small Business, Christian Cardona, spoke warmly of the potential of the Small States Trade Finance Facility and the impact it can have. “The modern Commonwealth represents a way for nations to stay in touch through goodwill, friendship, historical ties and trade,” he said. “The Trade Facility will be there to help small states where it matters. The economic empowerment of a nation is critical in the development of our communities and for sustainable development.”
The board is comprised of representatives of the donor governments while the Facility is administered and hosted by Malta. During the day-long meeting, members agreed on reporting procedures and an action plan for its work.
Officials will brief Commonwealth Finance Ministers on the Facility later this week at their annual meeting, held this year in Bali.