CDC’s investment will enable City Bank to extend foreign currency trade credit to local banks as well as local importers, exporters
City Bank has closed a $30 million trade finance loan deal from CDC Group, a UK-based development finance institution and impact investor.
As per the deal, CDC will provide systemic liquidity to the local bank through the loan facility and help support the import and export activities of the country.
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 $100 million of additional trade every year.
Additionally, the loan will enhance City Bank’s capacity of meeting the demands of its over 17 million client base that reside under the retail and small and medium enterprise (SME) sectors.
It will also facilitate increased trade and support crucial sectors of the local economy such as the ready-made garment, manufacturing and food processing and production industries.
According to a press release issued by City Bank, local banks often have difficulties in having access to short-term funding and the advent of the pandemic has further tightened the availability of any foreign currency funding.
With almost all trade imports denominated in USD, stable sources of short-term funding are essential to ensure that the demand for financing trade can be met.
M 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."
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, he added.
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, he added.
“This transaction is a significant step forward in the UK-Bangladesh economic partnership, further broadening our offer of financing instruments beyond grant finance. 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,” said Robert Chatterton Dickson, British high commissioner to Bangladesh.
CDC is the UK Government’s bilateral development finance institution.
Its 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.