Local banks in small states often face challenges in accessing international banks’ confirmation of trade lines to support their local import clients. To fill these gaps, the Commonwealth Secretariat engaged Momentus (formerly IFCL) to prepare a feasibility study for the design of a Commonwealth Small States Trade Financing Facility to be based out of Malta.
The facility was designed to cover 31 Commonwealth Small States (CSS) from the Caribbean, Africa, Mediterranean, and Asia-Pacific to enable confirmations of Letters of Credit (LCs) by guaranteeing the credit risk of LC opening banks from the CSS.
During consultations, the scope of the market assessment widened to include a thorough analysis of additional market gaps within the entire trade finance system of these CSS countries. Our approach to assess the potential demand for the facility involved both primary and secondary research to create a “bottom-up” view of potential demand based on surveys of local CSS banks and international banks, as well as a “top-down” estimation of potential demand.
The Small States Trade Finance Facility is now a five-year pilot project in Malta.