IFC, SCB agree to aid RI importers

JAKARTA (JP): The International Finance Corporation (IFC) and Standard Chartered Bank (SCB) signed an agreement on Thursday to provide some US$125 million in trade financing for Indonesian importers.

The IFC said in a press statement that the five-year revolving trade finance facility was part of efforts to help stimulate recovery in Indonesia's international trade flows.

"Three years into the Asian economic crisis, Indonesian businesses still have little access to trade finance from the local banking sector," the IFC said.

"In addition, international banks offer very limited letter of credit (L/C) confirmation facilities to local commercial banks," it added.

The IFC is the investment arm of the World Bank.

Indonesian exporters, which mostly import their raw materials, have long complained about the limited financial resources available from the local banking industry currently still struggling from the crisis.

The domestic banking crisis has also eroded confidence in local banks causing the limitations on L/C confirmation.

Elsewhere, the IFC said that the additional L/C confirmation lines would be provided to six selected local banks, including Bank Mandiri, Bank Internasional Indonesia, Bank Central Asia, Bank Danamon, Bank CIC and Bank NISP.

It said that the IFC would guarantee 40 percent of each transaction covered under the facility up to $50 million, while the SCB, which acted as the confirming bank, would shoulder 60 percent of the risk in each transaction.

Visiting IFC executive vice president Peter Woicke, who signed the agreement for the Corporation, said that the facility would expedite the recovery of foreign trade and spur economic growth by enhancing import financing of essential industrial and manufacturing inputs.

"The investment will help build confidence in the banking sector, and, through it, the IFC can reach many businesses in Indonesia," Woicke said.

The IFC said that it was also considering participation in other projects that would help strengthen Indonesia's economy and restore investor confidence.

The IFC is scheduled to sign a similar facility today with Sumitomo Bank Ltd.

The IFC focuses on providing loans and equity for investments in the private sector. It has been investing in Indonesia's private sector through loans and equity since 1968.

IFC officials said last year that it planned to earmark some $500 million in financial assistance to the Indonesian private sector over the next few years, particularly for export-oriented companies operating in the manufacturing sector, oil palm plantations and coal mining companies. (rei)