New fund set to help financing small enterprises in Commonwealth countries

A Commonwealth Trade Finance Facility will be set up and based in Malta, Prime Minister of Malta Joseph Muscat announced Thursday.

The new trade financing fund aims to boost trade and investment flows, particularly for small and developing commonwealth countries.

The facility, structured as a guarantee fund, will cover risk for providers of trade credit in financial institutions of Commonwealth countries. It seeks to stimulate lending by major banks to smaller banks in member states and reduce risk.

The voluntary fund hopes to attract start-up capital of 20 million U.S. dollars. It is estimated for every dollar invested, the fund aims to generate 20 dollars.

"It will provide member countries facing trade challenges with the finance they need to increase their trade capacity," officials said in a statement.

Malta, together with Mauritius, Sri Lanka and India signed a declaration of intent to support the new fund at Valletta Thursday, just one day ahead of the Commonwealth heads of government meeting (CHOGM).

Malta will host the facility and manage its governance structure, providing oversight for contributing member countries.

"We are acting as facilitators so small traders in small jurisdictions can penetrate new markets," Muscat said at a press conference held at Media Centre in St Julian's, Malta.

"We are very keen to create necessary trade infrastructure for ourselves and other small Commonwealth countries," he added.

Meanwhile, Muscat expressed his hope more countries will contribute to the facility.

It is said that the first phase of the fund will run over three years followed by a review. Financial investment will be sought from member countries and other parties that have expressed an interest in participating.

The fund will be operated by commercial banks using existing trade finance instruments, payments arrangements and operating infrastructures, according to the declaration.

"Four countries have signed the declaration as anchor investors. It is now a commercial fact. We just need to get back to the banks to make it operational," Commonwealth Secretary-General Kamalesh Sharma said at the press conference.

The CHOGM is held every two years. The theme for this year's meeting is Adding Global Value. Endit