The International Finance Corporation (IFC) is proposing an unfunded trade finance facility of up to $250 million for Banco Bradesco S.A., one of Brazil’s largest financial institutions, under its Global Trade Finance Program (GTFP).
The proposed project involves a GTFP limit in an aggregate amount of $250 million on IFC’s own account to Bradesco for trade-related transactions with a tenor of up to one year, according to an IFC project disclosure seen by CrowdFund Insider.
The purpose of the proposed IFC trade line is to support Bradesco’s trade program. GTFP’s investment, in the form of a trade line, will offer confirming banks partial or full guarantees covering the payment risk of Bradesco in Brazil for their trade-related transactions.
“IFC’s presence as a provider of guarantees will help Bradesco to connect with new banks and maintain and strengthen their existing network of correspondent banks,” IFC said in the disclosure.
The GTFP offers trade finance support to issuing banks by providing IFC’s guarantee through risk mitigation to counterparty banks.
By joining the program, Bradesco will also have access to a network of more than 300 global and regional confirming banks operating in 70 countries, potentially expanding the number of financial institutions available to support its international trade transactions.
The financing structure differs from a conventional loan because the proposed project is an unfunded trade finance facility.
Rather than providing Bradesco with direct funding upfront, IFC would provide guarantees to participating confirming banks covering the payment risk associated with eligible trade transactions handled by Bradesco.
The guarantees are designed to provide risk mitigation to counterparty banks and support trade flows by allowing financial institutions to transact with participating issuing banks under IFC’s guarantee.
Banco Bradesco, headquartered in São Paulo, is one of the largest financial institutions in Brazil and serves individuals, companies of all sizes, and national and international organizations.
The bank offers a broad range of financial products and services, including credit operations, deposit-taking, credit cards, insurance, pension plans, asset management, leasing, payment processing and securities brokerage.
Bradesco has operations in Brazil and abroad, giving it a role in facilitating financial and trade transactions involving domestic and international companies.
Under the proposed facility, IFC’s guarantee could cover either part or all of Bradesco’s payment obligations to confirming banks on qualifying trade-related transactions, depending on the structure of individual transactions.
The arrangement is expected to support Bradesco’s trade program while providing the bank with additional links to international financial institutions through the GTFP network.
IFC’s GTFP is structured around guarantees to support issuing banks and mitigate risks faced by confirming banks in cross-border trade finance.
The program’s network of more than 300 confirming banks across 70 countries provides participating financial institutions with access to global and regional counterparties.
For Bradesco, IFC said its participation would help the lender establish relationships with new banks while preserving its existing correspondent banking connections.
The proposed $250 million facility would be provided on IFC’s own account and would be available for transactions with maturities of no more than one year.