IFC proposes up to $25m working capital facility to Bangladesh's Bank Asia

International Finance Corporation (IFC), a member of the World Bank Group, has proposed to extend up to $25 million working capital solutions (WCS) facility to Bank Asia Ltd in Bangladesh, according to a disclosure.

The facility will be extended under the lender’s COVID-19 Emergency Response WCS Envelope (WCS Envelope), IFC said.

“The WCS Envelope is designed to provide funding to existing IFC client banks in emerging markets that will then extend new trade-related or working capital loans to companies whose cash flows have been disrupted by the global outbreak of the coronavirus pandemic,” it added.

This proposed project is a one-year facility, renewable for an additional one year, for a maximum aggregate tenor of two years. It is an up to $25 million senior loan from IFC’s own account in the form of WCS.

The project will support working capital, trade finance and foreign exchange (FX) liquidity needs of the sub-borrowers (export/import-based SMEs and corporates) through Bank Asia’s off-shore banking unit, according to the disclosure.

The  project is estimated to provide about $110 million of liquidity in aggregate over the maximum life of the project (up to 2 years) to Bank Asia, which will then on lend to up to 70 or more export-import based corporate and SME customers and support critical sectors like ready made garment/textile, power, pharma, chemical, edible oil and others.

“By sustaining the banks’ ability to provide these services, IFC’s proposed facility is intended to promote the resilience of trade finance markets, as well as broader stability that comes about by providing for the going concern of market participants in Bangladesh,” IFC said. 

Turbulence in global funding markets, among other factors, has made it difficult for the extensive network of clients and partner banks to maintain their role as an enabling platform for liquidity to multiple emerging markets, many experiencing their own acute liquidity shocks while the need for liquidity increases, IFC said.