Evaluation of the International Finance Corporation's Short-Term Trade Finance Programs, 2006

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Approach Paper

Evaluation of the International Finance Corporation’s

Short-Term Trade Finance Programs, 2006-2011

May 8, 2012

Background and Context

1. The International Finance Corporation (IFC) seeks to help expand access to trade

finance as part of the World Bank Group’s (WBG) broader strategy to enhance trade in

developing countries. The 2011 strategy Leveraging Trade for Development and Inclusive

Growth identified areas that the WBG is emphasizing in its support for enhanced trade in developing countries.1 The strategy is premised on the central role of trade as a driver of economic growth and development in developing countries. WBG documents cite research indicating that “no country in the last 50 years has sustained high levels of growth and significantly increased per capita incomes without greatly increasing trade”.2 Open trade enables countries to exploit their comparative advantage, create and expand competitive industries, and generate economic opportunities and employment. The main objectives of the Bank Group’s strategy to support trade are to help enhance trade competiveness and export diversification; reduce trade costs; expand market access; improve management of shocks; and enable greater participation in trade activities (see illustration in Figure 1). Progress toward each of these objectives is considered critical to attaining the overall goal of enhancing trade in developing counties.

2. Among the intermediate objectives to help reduce trade costs is increasing access to

trade finance. Access to trade finance is identified as an important determinant of the ability of firms to engage in trade. Trade finance creates the liquidity for firms to operate efficiently, reduces risks to firms, and enables transactions between unknown parties.3 Lack of access to finance for micro, small and medium industries (MSMEs) in developing countries, in particular, remains an important constraint to their viability and growth. IFC estimates that the absence of short-term finance for MSMEs can significantly slow their potential growth.4 The expansion of developing country economies over the past two decades has increased the demand for banking

1 World Bank Group, Leveraging Trade for Development and Inclusive Growth: The World Bank Group Strategy

2011-2021, June 2011.

2 ibid. p 1l; IFC, IFC Road Map FY12-14 – Impact, Innovation, and Partnership: Supplemental Paper, April 28 2011. (Internal document)

3 IFC, IFC Road Map FY12-14 – Impact, Innovation, and Partnership: Supplemental Paper, April 28 2011. (Internal document)

4 ibid. p 6

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sector intermediation in trade transactions. However, a gap in the supply of affordable trade finance exists due to the perception of high commercial and sovereign risk in developing countries as well as funding, regulatory compliance, and due diligence costs. IFC derives the rationale for its engagement in trade finance from these high perceived risks, a general lack of guarantors, a dearth of capacity from development banks, and the limited mandates of export credit agencies. Multilateral support is expected to help banks improve their positioning and expand the supply of trade finance.5

Figure 1. The World Bank Group’s Strategy to Support Trade, 2011-21

Source: IEG, based on Leveraging Trade for Development and Inclusive Growth: The World Bank Group Strategy 2011-2021, June 2011.

3. Since 2005, IFC’s primary instrument to support trade finance has been the Global

Trade Finance Program (GTFP). In November 2004, the Board approved the GTFP to “support the extension of trade finance to underserved clients globally.” The program allows IFC to assume the trade-related payment risk of financial institutions in developing countries by issuing guarantees to their correspondent (usually international or regional) banks. By mitigating the risks of trade transactions, the program aims to help less creditworthy countries and firms gain access to finance by reducing funding and regulatory compliance costs, improving liquidity in banks, lowering the costs of finance, decreasing collateral requirements, and supporting relationships between financial institutions (see Box 1). IFC emphasizes the potential of the program to increase access to trade finance in low-income countries, the Africa region, MSMEs, and critical economic sectors such as agriculture and energy.

5 IFC, Report to the Board of Directors on a Proposed Investment in Global Trade Facility Program World Region, October, 26, 2004.

ECONOMIC GROWTH AND POVERTY REDUCTION

Reduced Trade Costs�Reduced costs associated with

moving goods and services along

international supply chains,

including transport, logistics, and

finance costs

Enhanced Trade

Competitiveness and

Export Diversification�Increased value of exports

�Increased # of export markets

�Improved survival rate of exporters

Effective Management

of Shocks and Increased

Opportunities to

Participate in Trade

� Improved economy-wide

incentive framework

�INCREASED ACCESS TO

TRADE FINANCE

�Improved inter-

governmental regulatory

reform and cooperation �Expanded benefits of

trade to lagging regions

within countries

INCREASED TRADE

Expanded Market

Access

�Specific actions to address

market failures

�Improved markets for

transport and logistic

services

�Improved trade corridors

and regional trade facilitation

frameworks

� Improved regional

integration of markets

� Improved international

trade rules and institutions

�Inclusion of the gender

dimension in trade support

activities

� Better management of

trade shocks by most

vulnerable

�Increased trade in services

�Improved border

management

�Improved response to

food price increases and

volatility

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Box 1. Operation of a Typical GTFP Letter of Credit Transaction

Most of the GTFPs guarantees (around 80 percent) have supported letters of credit transactions. Under the program, IFC conducts due diligence and establishes a roster of approved local “issuing banks” in developing countries. It can then guarantee their payment obligations on specific transactions at the request of the local bank or the correspondent international or regional “confirming” bank. The guarantees are comprehensive, covering both political and commercial risks, and IFC can cover either the full amount or a partial amount of the transaction. Tenures have ranged from 1 day to over 5 years and average 5 months.

The diagram at right illustrates the operation of a typical letter of credit transaction guaranteed by the GTFP. An importer places an order from an exporter. The importer’s bank, the “issuing” bank, issues a letter of credit to its correspondent bank (usually in the same geographical region as the exporter). The correspondent bank then makes payment to the exporter on presentation of relevant documents. The correspondent bank may then request a partial or full guarantee from IFC to cover the payment risk of the issuing bank. Upon presentation of relevant shipment documents, the issuing bank makes payment to the correspondent bank.

Source: IEG diagram based on IFC program information.

4. After the onset of the global financial crisis, IFC significantly enhanced its short-

term trade finance activities. In December 2008, IFC positioned the GTFP as a key element of its crisis response. An expanded and modified GTFP was expected to help address the limited availability and rising cost of trade finance during the crisis. In addition, in May 2009, IFC

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established the Global Trade Liquidity Program (GLTP) to address liquidity constraints and temporarily support trade finance flows to developing countries. The $1 billion program was a collaborative effort among bilateral and multilateral development finance institutions and governments to disburse funds to global and regional banks with extensive trade networks. The program was enhanced in January 2010 with a further $1 billion in unfunded guarantee support. As a temporary crisis response measure, the GTLP was scheduled to be phased out in 2012, but it has since been extended due to continued weaknesses in global financial markets. In FY11, two additional short-term trade finance programs were initiated: the Global Trade Supplier Finance (GTSF) program and the Global Warehouse Finance Program (GTWP). The two programs aim to enhance trade activities by supporting access to working capital for suppliers in developing countries (GTSF) and for farmers and SMEs in the agriculture sector (GTWP). Box 2 describes IFC’s current short-term finance programs.

5. IFC has also administered a Trade Advisory Program to help banks build capacity

in their trade operations. The program was established in 2006 to help transfer international best practices and improve bankers’ technical and operational skills in trade. Training is focused on trade finance and international trade operations and consists of online courses and workshops run from field offices. The program also seeks to place trade finance professionals in client banks for several months to provide more in-depth training. Participants are GTFP banks, as well as other banks that request training. IFC reports that since program inception in June 2006, 140 training courses have been conducted, with over 3,800 attendees in over 60 countries.

6. IFC’s current trade finance program model sought to address past weaknesses. Before the launch of the GTFP in 2005, IFC had established 21 trade finance facilities between 1998 and 2003, for a total commitment of $542 million. Of these 21 facilities, 11 were never used, and of the 10 that were used, the average utilization rate was just 27 percent.6 Weaknesses with previous programs included their restriction to bilateral agreements, designed for use with a single country with a narrow set of eligible parties; cumbersome procedures that undermined the ability to respond to changing market conditions; fixed prices that may not have been in line with markets; stringent financial reporting requirements that were not standard market practice for trade-related transactions; and high capital charges that were not in line with the lower-risk profile of trade transactions and that reduced the profitability of the trade facilities. The new model represented by the GTFP was based on the European Bank for Reconstruction and Development’s (EBRD’s) trade finance program, which had been in operation for 10 years. Key elements included the flexibility to support trade as it shifted with market conditions, a quick response process and documentation in line with the nature of short-term trade transactions, flexible pricing according to market, and the ability to take 100 percent of the risk coverage.

6 IEG, The World Bank Group’s Guarantee Instruments, An Independent Evaluation, 1990-2007, 2009.

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Box 2. IFC’s Short-Term Finance Products

Global Trade Finance Program (GTFP)

� Established in FY06, the GTFP is IFC’s leading trade finance program that developed a new, more flexible, quicker-response platform.

� It aims to support access to trade finance in underserved markets worldwide and its authorized ceiling has grown from $500 million in 2006 to $3 billion in 2011.

Global Trade Liquidity Program (GTLP)

� Established in FY09, the GTLP is a multi-partner initiative of governments, development finance institutions, and private sector banks that aims to help address the shortage in trade finance resulting from the global financial crisis.

� Using both funded (phase 1) and unfunded (phase 2) instruments, the program seeks to increase access to trade finance in emerging markets by providing liquidity and risk mitigation to international banks with substantial emerging market trade networks.

Global Trade Supplier Finance (GTSF)

� Established in FY11 the GTSF is a joint investment and advisory program that provides short-term financing to exporters in emerging markets that sell to large international companies on open account terms.

� The program seeks to increase direct access to finance for exporters in developing countries (supplementing credit from local banks); reduce the costs of finance for exporters; and increase local supplier sales to large international firms in the program.

Global Warehouse Finance Program (GWFP)

� Established in FY11, the program aims to increase working capital financing to farmers and agriculture producers by leveraging their production.

� The program provides banks with liquidity or risk coverage backed by warehouse receipts, which can be used to provide short-term loans or guarantees to agricultural producers and traders ahead of export.

Critical Commodities Finance Program (CCFP) � Established in FY12, the CCFP supports the movement of agricultural and energy products to and from developing countries by promoting commodity-backed finance.

Source: IFC documents

7. The volume of IFC’s trade finance operations has expanded significantly since 2005

and continued growth is expected. Since the GTFP commenced operations in September 2005, it has experienced significant growth. The program’s authorized exposure ceiling was increased from $500 million in November 2004 to $1 billion in January 2007, to $1.5 billion in October 2008, and then to $3 billion in December 2008, following the onset of the crisis (Table 1). Annual commitments rose from $265 million in 320 guarantees in FY06 to $4.6 billion in 3,100

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guarantees in FY11, or 38 percent of IFC’s total commitments for the year.7 Between 2006 and 2011, the number of participating developing country banks increased from 20 to 220 and the number of developing countries covered rose from 6 to 67. Guarantees have been concentrated on issuing banks in the Middle East and North Africa (32 percent) and Africa (30 percent). Thirty percent of guarantees issued have covered payment risks of banks in low-income countries. The GTLP also saw substantial usage, and by the end of FY11, it had disbursed nearly $1.8 billion to 8 program banks, with the Latin America and the Caribbean and the East Asia and Pacific regions accounting for 70 percent of transactions. Further expansion of IFC’s short-term finance activities is expected. Along with an expected request for an increase in the GTFP’s authorized ceiling in FY13, IFC also plans to increase the GWFP ceiling to $500 million and see an expansion of its CCFP and GTLP programs. Total commitments for short-term finance products are expected to reach $8 billion in FY15.

Table 1. GTFP Basic Indicators, FY06-FY11

FY06 FY07 FY08 FY09 FY10 FY11

Authorized exposure ceiling ($ million) 500 1,000 1,000 3,000 3,000 3,000

Total commitments ($ million) 265 770 1,448 2,376 3,461 4,623

Number of guarantees 320 564 1,008 1,869 2,811 3,106

Number of guarantees—letters of credit 295 439 815 1,576 2,408 2,390

Average guarantee size ($ millions) 0.83 1.37 1.44 1.27 1.23 1.49

Number of participating confirming banks 28 50 56 86 96 98

Number of participating issuing banks 19 50 79 137 165 186

Average guarantee tenure (days) 179 189 157 133 142 143

Source: GTFP database

8. IFC Board reports identify various development results of its trade finance

programs. An evaluation of the GTFP was conducted by external consultants on behalf of IFC in 2009, and IFC regularly reports to the Board on the development effectiveness of its trade finance programs.8 In its Road Map FY12-14, for example, IFC stated that the GTFP had “a strong track record of development impact across regions and sectors.” Among the indicators it reported were: 73 percent of the GTFP’s transactions were in IDA countries; the GTFP/GTLP had supported over $4.8 billion in trade in Africa; over 80 percent of transactions supported SMEs; and one-third of transactions supported agribusiness, a strategic focus area for IFC (Table 2). The GTFP had also supported trade between developing countries, with about 35 percent of its volume supporting south-south transactions. IFC also indicates several other benefits of the

7 Commitments under the GTFP include repeated turnover of short-term facilities and do not reflect actual exposure, which remains under the $3 billion program ceiling. In addition, the commitment levels for short-term finance products do not reflect the capital usage of long-term investments. For example, IFC estimates that in FY14, its commitments under its short-term finance programs would be around 48 percent of new commitments. However, this would translate into use of only about 5 percent of IFC’s capital.

8 International Financial Consulting, Evaluation of the Global Trade Finance Program, Final Report submitted to the International Finance Corporation, August 12, 2009.

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GTFP. In particular, the program had become an entry product for IFC - a means to engage with and establish relationships in difficult countries. The GTFP had played such a role in 15 fragile states and challenging markets, including Democratic Republic of the Congo, Haiti, and Liberia. The program also served as a means for IFC to develop relationships with new financial institution clients in developing countries, with initial in interaction through the GTFP leading to more than 30 projects involving other IFC instruments.

Table 2. IFC-Reported Reach of the GTFP/GTLP into Underserved Markets

Indicator

GTFP

(Cumulative

FY06-11)a

GTLP

(Cumulative

FY09-11)b

Percentage of transactions in IDA countries 73% 31%

Percentage of dollar volume of guarantees in IDA countries 53% 26%

Percentage of transactions supporting agribusiness 33%

Percent of transactions supporting SMEs (by number) 83% 81%

Percentage of south-south transactions 35%

Number of fragile states involved (as issuing banks) 15

Geographic Reach (FY 2010) GTFP (FY10)

GTLP

(FY10)

Africa 22% 20%

East Asia and the Pacific 8% 25%

Europe and Central Asia 15% 2%

Latin America and the Caribbean 34% 36%

Middle East and North Africa 16% 2%

South Asia 5% 14%

Sources: IFC Road Map FY12-14 – Impact, Innovation, and Partnership: Supplemental Paper, April 28 2011. GTLP Newsletter No.3, July 2010; GTFP Transaction database; IFC Short Term Trade Finance Strategy Presentation, May 5, 2011. Notes: a. Data are from 2005 to 2011 b. Data are from 2009 to 2011

9. IFC plans more systematic assessments of its development contributions through

monitoring of its active trade finance portfolio. In 2011, IFC instituted more systematic project-level data gathering and monitoring to enhance its ability to measure and report on the development results of its trade finance activities. Under the Development Outcome Tracking System (DOTS) framework, IFC is collecting information to gauge its impact at four levels: (i) at the country level, through indicators such as the volume of trade finance transactions and the number of banks active in trade finance in a country; (ii) at the bank level, through indicators such as the size of trade finance in the institution or its SME reach; (iii) at the beneficiary level, through indicators such as number of jobs created, or the increase in exports or imports; (iv) at the program level, through indicators such as the regional or income group distribution of

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transactions. IFC also plans to prepare an annual GTFP Development Impact Report. Given their distinctive nature, IFC does not include individual trade transactions under its Expanded Project Supervision Report (XPSR) system, and so no transaction-level evaluations have been conducted. IEG and IFC are currently discussing the methodology by which such assessments might be conducted. To date, IEG has not conducted a program-level assessment of IFC’s trade finance activities.

Purpose, Objectives, and Audience

10. Board members have requested an IEG review of IFC’s trade finance activities. In its most recent strategy documents, the Road Map FY12-14 and Road Map FY13-15, IFC has indicated that it plans to expand its short-term finance activities, including requesting an increase in the authorized ceiling of the GTFP.9 Due to the rapid growth of IFC’s trade finance activities, their current composition of 40 percent of IFC’s total annual commitments, and their expected continued growth, members of the Board have asked IEG to undertake an independent evaluation of these activities. This proposed evaluation will review IFC’s trade finance activities since 2006; assess their relevance, efficacy, and efficiency; and provide an overall assessment of their development effectiveness. The evaluation will draw lessons from experience and make recommendations to help enhance the achievement of IFC’s development mission. The evaluation report is expected to inform the discussion of the extent and nature of IFC’s future engagement in short-term trade finance activities.

11. While the Board is the primary audience, the evaluation also seeks to inform a

broader range of stakeholders (Figure 2). In seeking to inform the Board on the development effectiveness of IFC’s trade finance activities, the evaluation expects to develop findings that are directly relevant to IFC program management and staff. The evaluation will also indirectly address the broader role of multilateral development banks (MDBs) in the provision of short-term trade finance products. Various MDBs have active trade finance programs, including EBRD, the Asian Development Bank (ADB), the Inter-American Development Bank (IADB), the Islamic Development Bank (IsDB), and the African Development Bank (AfDB). Some of the evaluation units of these institutions have expressed strong interest in the methodology and findings of this evaluation. International and local private financial institutions are the primary clients of IFC’s trade finance products and are therefore also stakeholders of the evaluation. The evaluation will also address issues raised by international agencies and regulatory authorities. For example, several international bodies, including The World Trade Organization (WTO), the Berne Union, and the G20 have each called for MDBs to enhance their trade finance activities.

9 IFC, “Road Map FY12-14—Impact, Innovation, and Partnership,” May 2011 and IFC, Road Map, FY13-15 – Creating Innovative Solutions in Challenging Times, March 8 2012.

Figure 2. Key Stakeholders of the Evaluation of IFC

Source: IEG

Evaluation Questions and

12. The evaluation will seek to answer the following questions:

Overall question: What is the development contribution of IFC through the use of shortterm trade finance instruments?

Relevance: What is the rationale for IFC to offer trade finance products

a. What market failures are being addressed by b. Is IFC competing with other players in trade finance?c. To what extent do trade finance productsd. What are the opportunity costs of

Efficacy: To what extent

a. To what extent have the underserved markets?

10 Detailed evaluation questions, together with descriptions of the information required, collection methods, and analytic approaches are in the evaluationB.

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Key Stakeholders of the Evaluation of IFC’s Trade Finance Activities

Questions and Coverage

The evaluation will seek to answer the following questions:10

What is the development contribution of IFC through the use of shortfinance instruments?

What is the rationale for IFC to offer trade finance products?

market failures are being addressed by IFC’s trade finance productIs IFC competing with other players in trade finance?

trade finance products support achievement of IFCWhat are the opportunity costs of trade finance products for IFC?

extent have IFC’s trade finance programs met their objectives?

the programs met their primary goal of facilitating trade in underserved markets?

Detailed evaluation questions, together with descriptions of the information required, collection methods, and analytic approaches are in the evaluation design matrix in Attachment

What is the development contribution of IFC through the use of short-

?

trade finance products?

support achievement of IFC’s mission?

rams met their objectives?

goal of facilitating trade in

Detailed evaluation questions, together with descriptions of the information required, design matrix in Attachment

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b. To what extent have the programs met secondary goals, such as helping IFC enter new markets, engage in fragile and conflict-affected states, and support key economic sectors?

c. To what extent have the programs helped alleviate the effects of the global financial crisis in participating banks?

d. Are there other benefits or shortcomings of the programs that are not generally recognized?

Efficiency: Are the trade finance programs efficient instruments, from both a program and institutional perspective?

a. What is the financial viability of IFC’s trade finance programs? b. What are the capital usage and risk exposure implications of trade finance products

for IFC?

IFC Work Quality: Is IFC effectively managing factors within its control?

a. Do IFC’s trade finance programs meet industry service standards for the delivery of trade finance products (response time, information technology platform, speed of decision-making, adequacy of tenure and limits)?

13. The evaluation will focus on two specific programs and IFC’s trade finance

Advisory Services and cover the period 2006-11. This evaluation proposes to cover the GTFP, the GTLP, and IFC’s trade finance Advisory Services. The other trade finance programs were introduced only recently, and therefore offer limited data and experience to inform the evaluation. Nevertheless, the underlying principles of the more recent programs are modeled on the GTFP. Thus, even through the evaluation questions will be largely answered through the experience of the GTFP, GTLP, and the Advisory Services, the findings can inform a discussion of IFC’s broader short-term trade finance programs. The period of coverage shall be 2006-2011. IFC introduced its current model of trade finance in 2006, when the GTFP was established. The period allows the evaluation to be informed by an approximate division of pre-crisis years (FY06-08) and crisis years (FY09-11).

Evaluation Design and Evaluability Assessment

14. The proposed evaluation will build on IFC’s previous evaluation of the GTFP. The 2009 evaluation of GTFP commissioned by IFC (see footnote 8, above) made a positive overall assessment based on the program’s successful performance in several areas: networks and partnerships, facilitating trade in underserved markets, development of banks in emerging markets, operation efficiency and effectiveness, financial performance, program responsiveness in times of crisis, training and advisory services, and strategic relevance and fit. The proposed evaluation will build on the GTFP evaluation and will include all the assessment criteria of that evaluation. It includes a more explicit framework of relevance, efficacy, efficiency, and institutional performance. The proposed evaluation also aims to further understand the nature of demand for trade finance programs, benchmark trade finance program indicators against those of other providers, assess the longer-term benefits of the programs, and examine the effects of the programs on all stakeholders (importers, exporters, issuing banks, and correspondent banks).

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15. The AsDB and EBRD have also conducted assessments of their trade finance

programs. The Real-time Evaluation of the Asian Development Bank’s Response to the Global

Economic Crisis of 2008–2009 assessed the rationale, consistency, and design of ADB’s economic crisis support; responsiveness in terms of preparedness and how ADB implemented its support; and results in terms of achieving program outputs and anticipated outcomes sustainably. It found ADB’s trade finance program to be highly relevant and responsive and successful in achieving its objectives. The evaluation concluded that trade finance programs were an excellent crisis-response tool, particularly in Asia, where trade intensity was high; and for smaller developing countries that rely on foreign trade and are more vulnerable to global crises. EBRD’s Evaluation of Trade Facilitation Program (TFP) (August 2010) assessed the relevance, efficacy, efficiency and impact of the trade finance programs. It rated the overall outcome of the programs as partially successful. Relevance was assessed to have declined as EBRD’s products became less responsive to market demand.

16. Several recent IEG evaluations also covered aspects of the trade finance programs. IEG’s evaluation on The World Bank Group’s Response to the Global Economic Crisis (Phase I and II) found that both the GTFP and GTLP have had broad reach, including among SMEs and in the Africa region, and had high leverage of IFC resources. The evaluation found that is was likely that the initiatives helped small businesses whose needs may not otherwise have been met. However, both the Phase I and II reports cited weaknesses in the M&E framework of the IFC’s short-term finance programs. IEG’s internal “Evaluability Assessment of Trade Finance Operation” found that the XPSR methodology has the potential to assess development outcome, investment outcome and IFC work quality of the GTFP projects. However, at present inadequate information existed on trade finance clients and transactions in order to apply the XPSR framework.

17. The proposed evaluation’s underlying criteria for assessing the development

effectiveness of IFC’s short-term finance programs will be their relevance, efficacy, and

efficiency. The evaluation will be designed to address the core criteria of (i) Relevance: Is IFC doing the right things? (ii) Efficacy: Is IFC doing them well; and (iii) Efficiency: Is IFC doping them efficiently? In addition, the evaluation will assess IFC’s performance with respect to its management of factors within its control. Key criteria for assessments in each area are as follows:

• Relevance/Additionality. In assessing relevance, the evaluation will seek to discern the market failures that the program seeks to address. This is IFC’s additionality in the provision of short-term finance products. The main criterion is whether IFC is competing with other players in the provision of these products or filling a need that would otherwise be unmet. IFC’s pricing will be sampled to determine if it is at, above, or below markets. Consideration will be given to trade-offs in terms of IFC’s resource usage in trade finance operations vis-à-vis other IFC interventions.

• Efficacy. In assessing the efficacy of the program the evaluation will review the extent to which the trade finance programs contribute to their primary objective of supporting trade in underserved markets. This reflects the private sector evaluation criteria of an

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intervention’s contribution to private sector development.11 This will be gauged in the immediate term through reach in underserved markets and creation of new relationships (see Figure 3), such as support for SMEs, south-south trade, fragile and conflict-affected countries, high risk countries and regions, and critical economic sectors. Effects in the longer-term will also be gauged, such as through creation of lasting relationships between financial institutions, trade transactions occurring without IFC guarantees, and development of trade finance products and markets among participating banks. Achievements will be benchmarked against those of other players, where appropriate. IEG will also assess the degree to which secondary stated objectives are being achieved, such as enabling IFC to enter and develop business in difficult countries. The evaluation will draw on existing research and evidence to establish the links between increased access to trade finance and increased trade and between increased trade and increased economic growth and development.

Figure 3. Expected Development Outcomes of Trade Finance Programs

Source: IEG

• Efficiency. Efficiency of the trade finance programs will be assessed by their profitability to IFC. This reflects the private sector evaluation criteria of the investment outcome of an operation. The premise is that if the programs are relevant and effective but are running at a loss, then they are unsustainable. IEG will aim to calculate IFC revenue streams and cost allocations at the program level. IFC efficiency indicators will be benchmarked against other providers and industry standards, as appropriate.

• IFC work quality. Work quality will be assessed by the degree to which IFC is successfully managing factors within its control. This will include whether the operation of the programs meets service standards in the industry. Indicators include appraisal standards, response time; information technology platform, speed of decision-making; adequacy of tenure and limits. IFC work quality indicators will be benchmarked against other providers and industry standards, where appropriate.

11 To the extent relevant, other criteria, such as project business success, environmental and social effects, and economic sustainability, will also be applied.

Short-term Medium Longer-term

Due diligence appraisal Expanded Bank network

Access to trade finance in

new markets (South-South,

IDA, SSA, Frontier, SME,

agribusiness)

Reduced risk perceptions

More trade finance available

to issuing banks without IFC

guarantees

Systems & hardware Number of transactions New bank relationshipsReduced collateral, longer

tenor, larger size

More competitive trade

finance markets

Economic capital Volume of guarantees

Improved capacity in

developing country banks to

manage trade transactions

Lasting relationships between

financial institutions

More accessible and lower

costs of finance for

beneficiaries

AAA rating People Trained

Training services

Existing relationships

Marketing

Expected Development OutcomesGoals that the

Programs Seeks

to Contribute to

More trade, economic

growth, and poverty

reduction.

IFC Inputs Intermediate Outputs

Demonstration effectsAnti-cyclical role in times of

crisis

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18. A range of different information sources and methods of analysis will be used in the

evaluation. The methodology used to answer each evaluation question is described in detail in the Evaluation Design Matrix in Attachment B. The evaluation builds on extensive work IEG has done on preparing a project-level evaluability assessment for trade finance. The main sources of evidence to address the evaluation questions will include: IFC program information; external literature on trade finance; information from other providers of trade finance programs in both the public and private sectors; information from program clients including local issuing banks, international correspondent banks, importers and exporters; and information from trade finance professionals and global institutions. In obtaining and analyzing information, the evaluation will use the following means:

• External literature review. The evaluation will review relevant literature to identify the theoretical underpinnings of trade finance in supporting trade, identify market failures, compare the nature of trade finance before and after the global financial crisis, identify regulations pertinent to trade finance, identify international trade finance providers and practices, and map IFC trade finance programs in the industry.

• IFC document review. Relevant IFC documents will be reviewed to gain a clear understanding of the trade finance programs and their implementation and evolution. The documentary evidence will be the primary source material to address the evaluation questions, identify statements and findings to be validated, and establish hypotheses for further analysis. An analysis of the initial goals set out by IFC will serve as a benchmark to assess the achievements of the trade finance programs and assess their relevance and efficiency within the overall context of IFC’s mission and the institution’s resource allocation. IFC self-evaluations will be taken into consideration when appropriate.

• IFC database analysis. The evaluation will undertake analysis of IFC program databases, which represent the comprehensive set of transactions under each program. Analysis will inform the evaluation of the demand, usage, and reach of the trade finance programs. The evaluation will also use the Development Outcome Tracking System. DOTS data (collected over the past year) will provide bank-level data to assess the contributions of the programs.

• External database analysis. External databases from sources such as the World Bank, MDBs, the Berne Union, WTO, and International Monetary Fund will be used to add context and create benchmarks for IFC’s programs. WTO data on trade and trade finance will provide the evaluation with statistics to illustrate the context in which the GTFP operates. Data from the Berne Union members and MDBs will be used to benchmark indicators of reach and efficiency of IFCs trade finance programs.

• Original survey administration and analysis. IFC has recently commissioned a survey of new participating issuing banks as well 20 percent of existing client banks. IEG will work with IFC to develop original surveys of other issuing banks, correspondent banks, and a sample of beneficiary firms. These instruments will elicit views of key stakeholders as to the relevance, effectiveness, and efficiency of the trade finance programs. This information will supplement data from existing trade finance surveys

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such as those administered by the World Bank, IMF/Bankers’ Association for Finance and Trade, and the International Chamber of Commerce.

• IFC staff interviews. Additional data for the evaluation will be obtained through interviews with the IFC staff. Discussions will serve as a source of opinions, insights, and hypotheses on the effectiveness of trade finance programs, their role in global trade finance, and the role of short-term finance within IFC operations.

• Stakeholder interviews. Opinions and insights will be sought from other major stakeholders of IFC’s trade finance programs including client banks, non-client banks with characteristics similar to the participating banks (in selected case studies), trade finance professionals, international agencies and regulatory bodies, private and public providers of trade finance products, and government officials (in selected case studies).

• Illustrative client-level case studies. To supplement IFC and survey data, a purposeful sample of client-level case studies will be selected and conducted in which the costs and benefits of IFC’s trade finance programs on each client—issuing banks, local banks, importers and exporters will be examined. Criteria for selection of case studies will include the frequency of participating bank use of IFC facilities, the tier of the developing country bank, south-south transactions, and the direction of trade (that is, import to and from developing countries).

• Illustrative country-level case studies. A small, purposeful sample of country case studies will be undertaken to supplement survey data and inform the evaluation of broader effects of the trade finance programs in a country, including demonstration effects, reduction of risk perceptions, and access to trade finance for underserved markets. Criteria for selection of the sample will include fragile and conflict-affected countries, a less developed region in a middle-income country, the Africa and Middle East and North Africa regions, countries without other IFC business, and countries with relatively high or low risk ratings.

19. The study will utilize several counterfactuals to help inform assessments of the

development contributions of IFC’s programs. Counterfactuals will be developed to inform assessments of the extent to which IFC programs helped: (i) enhance trade finance capacity and operations in issuing banks; (ii) build long-term relationships between banks; (iii) correspondent banks expand their trade finance networks and business; (iv) beneficiary firms gain access to finance; (v) address negative effects of the global finance crisis among participating banks. The counterfactuals will be based on bank and firm level data obtained during structured interviews during client and country case studies. At the bank level, non-participating banks in the country with similar characteristics as participating banks (such as tier, trade finance products, and market) will be identified and an assessment will be made the evolution of their trade finance capacity, operations, and relationships over the same period as the participating banks. This analysis will help understand the particular contributions of IFC’s programs on participating issuing banks, controlling for broader factors in the country environment. At the correspondent bank level, a sample of international or regional banks that do not participate in IFC’s programs will be interviewed to understand the evolution of their trade finance business over similar periods as correspondent banks that use IFC’s programs. This will allow some inferences on the

15

nature of the demand for IFC’s products and how obstacles to expanding trade finance might be overcome in the absence of IFC’s programs. At the firm level, during the country case studies, IEG will identify non-beneficiary firms that are in the same industry and have similar characteristics as the beneficiary firm of a transaction in order to understand if and how they conducted similar transactions without the benefit of IFC’s programs.

20. Information gathering and analysis through these steps will be largely sequential. The study will begin with a literature and document review and IFC staff interviews that will provide a foundation for the evaluation. Initial hypotheses will be formed at this stage. This will be followed by an analysis of IFC databases that will shed light on program-specific trends. The study will commission surveys early in the evaluation as experience has shown that results take time to acquire. Interviews with stakeholders and case studies will follow and be tailored to supplement material previously gathered and illustrate key points to be made in the evaluation. The literature review and data analysis will be followed by extensive interviews with IFC staff engaged in both the operational and Advisory Services aspects of the trade finance programs. Following the interviews with staff, client and country-level case studies will then be conducted in order to validate assessments based on desk reviews, further test hypotheses, establish new finding, and illustrate findings and experience. The material from the various sources will be assimilated into background papers on specific topics, which will then be integrated into the main report.

21. The evaluation of IFC’s short-term trade finance programs will be constrained by

several factors. Due to their distinct nature, short-term trade finance transactions have not been included in the XPSR framework to date and the evaluation will therefore not be able to draw on project level evaluations. The availability of information is also severely constrained in some areas. For example, recent literature indentifies limited data on global and country-level trade finance flows as a key obstacle to research and better understanding of the industry. Given that the industry is in the private domain, key information such as pricing levels and market information may be not available or disclosable. Ease of access to participating issuing and correspondent banks as well as to non-participating banks is likely to vary substantially. These constraints will be accommodated during the evaluation process in various means. For example, proxy indicators will be used, where relevant; client and case studies will be modified according to the receptivity and willingness to share information on the part of participating banks. In these and other areas, IEG expects to rely on the full support and facilities of IFC management and staff to ensure the availability of quality information to inform the evaluation.

Quality Assurance Process

22. The draft evaluation report and any related working papers will be peer reviewed to

ensure accurateness, credibility, and impartiality of the findings and recommendations. Peer reviewers for the evaluation will be Bernard Hoekman, Director of the World Bank’s International Trade Department, and Marc A. Babin, former Director of IFC’s Corporate Portfolio Management Department. The quality assurance process for the evaluation will also include an external technical advisory panel that will convene at critical points in the evaluation to advise the team on their research, findings, and recommendations.

16

Outputs and Dissemination Plan

23. The primary output of the evaluation will be the report to the Board’s Committee

on Development Effectiveness (CODE) that will contain the main findings and

recommendations. The report will be submitted to CODE in time to inform the discussion of IFC’s expected request for an increase in the authorized capital of the GTFP in December 2012. Beyond the primary output, IEG will develop briefs, presentations, and other output formats as appropriate to reach other audiences for the evaluation. Beyond the Board of Directors and IFC staff and management, key stakeholders include private banks and insurers engaged in trade finance, multilateral and bilateral agencies with trade finance programs, evaluation agencies, and global trade policy and regulatory institutions.

24. Continuous stakeholder interaction will be sought to enhance the evaluation

process. Outreach and dissemination for this study will be conducted in two phases: a) Outreach during the evaluation process and b) Outreach after the study is complete. Phase I of the outreach will focus on soliciting feedback and comments from stakeholders and building interest in the study. The goal is to make the evaluative process transparent and participatory by inviting stakeholders to share their knowledge and experiences and by keeping stakeholders informed about the evaluation progress. This interaction will help gather information and qualitative data to triangulate data obtained through other research and information gathering methods. The process also aims to develop a core group of stakeholders through which the evaluation recommendations and findings can be channeled when the evaluation is complete.

25. Several online means will be used to engage stakeholders during the evaluation

process. A key means of interaction with stakeholders will be a dedicated webpage that will describe the evaluation scope and goals, report on evaluation progress, and seek ongoing feedback and commentary from interested parties. IEG will use IFC’s internal collaboration platform, iCollaborate, to raise key questions and communicate with IFC staff. IEG will also use its existing Facebook page to tap the existing membership of over 7,700 individuals and institutions. IEG will also set up a study-specific Facebook page to reach target groups with key messages and questions. IEG will leverage LinkedIn trade finance groups to attract the attention of trade finance professionals from around the world. Identified groups and individuals will be invited to participate in discussions held on the main webpage and on Facebook. IEG also aims to interact with most influential tweeters on trade finance issues, connecting with IFC’s accounts that will help reach IFC staff who follow such accounts.

26. In addition to outreach during the evaluation process, IEG will also implement an

outreach plan once the evaluation is complete. Phase II of the outreach will start once the report is complete and publicly launched. IEG will plan to publish and disseminate the main messages of the evaluation within the WBG and externally. To achieve this, IEG will use a variety of means, including face-to-face meetings, seminars, conferences, and online social media and web forums. The effort will target key stakeholders, particularly IFC staff and relevant international bodies. Dissemination will include presentations to staff at headquarters and country offices; presentations at relevant events organized by evaluation networks and MDBs; dissemination of findings on social media channels and relevant online networks; contribution of online pieces in the form of blogs and/or videos with key messages from the study; and other outreach activities to increase awareness and use IEG findings. The evaluation

17

team intends to connect with international conferences and seminars concerned with trade finance these events to bring the evaluation to the attention of attendees and seek opportunities to present its findings and recommendations (Table 3).

Table 3. Potential Dissemination Events for the Trade Finance Evaluation

Event name Date Location

International Chamber of Commerce Banking Commission Meeting March, 2013

IFC Spring Meetings April, 2013 Washington, DC

G20 Meetings June, 2013 Moscow

Exporta 9th Annual Innovations in Trade and Export Finance Conference

June, 2013 New York

WTO Trade Finance Expert Group Meeting May, 2013 Geneva

Resources

27. Timeline. The evaluation will be submitted to the Board of Directors in December 2012, ahead of IFC’s expected request for an increase in the GTFP’s authorized ceiling.

28. Budget. The budget for the study is estimated at $720,000, an amount consistent with other major IEG sector studies.

29. Team and skills mix. The skill mix required to complete this evaluation include (i) evaluation experience and knowledge of IEG methods and practices; (ii) familiarity with the policies, procedures, and operations of IFC; (iii) knowledge of WBG and external information sources; and (iv) practical, policy, and academic expertise in the trade finance, banking, and trade sectors. The evaluation will be prepared by a team led by Asita De Silva (Task Team Leader) consisting of Bahar Salimova (Information Officer), Chau Pham (Program Assistant), Donald Smith (Consultant), Maria Kopyta (Research Analyst), Melvin Vaz (Evaluation Officer) Michael Pomerleano (Advisor), Nestor Ntungwanayo (Consultant), Richard Kraus (Program Assistant), Thierry Senechal (Consultant), Unur Demberel (Research Analyst), and William Hurlbut (Senior Policy Writer). Other senior external consultants will be engaged during the evaluation. The evaluation will also seek to partner with local consulting firms to conduct some of the case studies. The report will be prepared under the direction of Stoyan Tenev, Manager, IEGPE and Marvin Taylor-Dormond, Director, IEGPE.

18

Attachment A. Bibliography

Ahn, JaeBin. 2011. A Theory of Domestic and International Trade Finance. Washington, DC: IMF.

Asmundson, Irena, Thomas Dorsey, Armine Khachatryan, Ioana Niculcea, Mika Saito. 2010. Trade and

Trade Finance in the 2008-09 Financial Crisis. Strategy Policy and Review Department. Washington, DC: IMF.

Auboin, Marc, Moritz Meier-Ewert. 2003. Improving the Availability of Trade Finance during Financial Crises. Geneva: WTO.

Auboin, Marc. 2009. “Boosting the Availability of Trade Finance in the Current Crisis: Background Analysis for Substantial G20 Package.” Center for Economic Policy Research Policy Insight No. 35. Geneva: WTO.

Auboin, Marc. 2009. “Restoring Trade Finance During a Period of Financial Crisis: Stock-taking of Recent Initiatives.” Economic Research and Statistics Division. Geneva: WTO.

Cadot, Olivier, Ana M. Fernandes, Julien Gourdon, Aaditya Mattoo. 2011. Impact Evaluation of Trade

Interventions: Paving the Way. Policy Research Working Paper. Washington, DC: World Bank.

Chauffour, Jean-Pierre, Mariem Malouche. 2011. “Trade Finance during the 2008-9 Trade Collapse: Key Takeaways.” Economic Premise 2011:66, 1-6.

Chauffour, Jean-Pierre, Mariem Malouche (eds.). 2011. Trade Finance during the Great Collapse. Washington, DC: World Bank.

Cornford, Andrew. 2010. Basel 2 and the Availability and Terms of Trade Finance. Global Commodities Forum. Geneva.

EBRD Evaluation Department. 2003. “Special Study—Regional Trade Facilitation Programme: Fostering Transition through Documentary Credit.” London: EBRD.

EBRD Evaluation Department. 2010. “Special Study—Trade Facilitation Programme Regional.” London: EBRD.

Grath, Anders. Jan 28, 2012. The Handbook of International Trade and Finance: The Complete Guide to

Risk Management, International Payments and Currency Management, Bonds and Guarantees,

Credit Insurance and Trade Finance. Kogan Page.

Hageboeck, Molly. 2010. From Aid to Trade: Delivering Results. A Cross- Country Evaluation of USAID

Trade Capacity Building. Washington, DC: USAID.

ICC. 2010. Rethinking Trade Finance. ICC Banking Commission Market Intelligence Report. Paris.

ICC. 2011. Global Risks—Trade Finance 2011. Paris.

ICC. 2011. Global Survey on Trade and Finance. Paris.

IMF. 2009. “Survey of Private Sector Trade Credit Developments.” Strategy, Policy, Review Department. Washington, DC.

19

International Finance Corporation. 2011. “IFC Short Term Finance Strategy.” Washington, DC. May 5, 2011.

International Finance Corporation. 2004. World Region: Proposed Investment in Global Trade Finance Program. Washington, DC.

International Finance Corporation. 2005. Update on World Region: Global Trade Finance Program (GTFP). Washington, DC.

International Finance Corporation. 2006. World Region: Proposed IFC Contribution for Technical Assistance and Capacity-Building in Africa Region in Support of IFC’s Global Trade Finance Program (GTFP). Washington, DC.

International Finance Corporation. 2006. World Region: Proposed IFC Contribution for Technical Assistance and Capacity-Building in Africa Region in Support of IFC’s Global Trade Finance Program (GTLP). Washington, DC.

International Finance Corporation. 2007. World Region: Proposed Increase and Modification of Investment in Global Trade Finance Program (GTFP II). Washington, DC.

International Finance Corporation. 2008. Global Trade Finance Program: Opportunities in Financial Markets. Washington, DC.

International Finance Corporation. 2008. World Region: Proposed Increase and Modification of Investment in Global Trade Finance Program (GTFP III). Washington, DC.

International Finance Corporation. 2008. World Region: Proposed Increase and Modification of Investment in Global Trade Finance Program (GTFP IV) to Provide Emergency Relief in Response to the Global Finance Crisis. Washington, DC.

International Finance Corporation. 2009. World Region: Proposed Investment in Global Trade Liquidity Program. Washington, DC.

International Finance Corporation. 2010. IFC FY10 Annual Report on Financial Risk Management and Capital Adequacy. Washington, DC.

International Finance Corporation. 2010. Report on an Audit of the Activities of the IFC’s Global Trade Finance Program (GTFP). Washington, DC.

International Finance Corporation. 2010. World Region: Proposed Investment in Global Trade Supplier Finance and Global Warehouse Finance Program. Washington, DC.

International Finance Corporation. 2011. IFC Road Map FY12-14: Impact, Innovation, and Partnership. Washington, DC.

International Finance Corporation. July 2010. IFC Bulletin: Global Trade Liquidity Program (No.3). Washington, DC.

International Finance Corporation. January 12, 2012. “IFC Extension of Global Trade Liquidity Program (GTLP) and Proposed Investment in the Critical Commodities Finance Program (CCFP), Wells Fargo Mena, and SocGen/Rabobank.” International Finance Corporation. Washington, DC.

20

International Finance Corporation. January 12, 2012. “World Region: IFC Crisis Response: Proposed Extension of Investment in the Global Trade Liquidity and Proposed Investment in the Critical Commodities Finance Program.” International Finance Corporation. Washington, DC.

International Finance Corporation. January 12, 2012 “World Region: Proposed Investment in Global Trade Liquidity Program-Wells Fargo.” International Finance Corporation. Washington, DC.

International Financial Consulting. 2009. Evaluation of Global Trade Finance Program. Ottawa.

International Financial Consulting. 2011. Short Term Finance: Design of a Development Outcome

Tracking System (DOTS). Ottawa.

Korinek, J., J. Le Cocguic and P. Sourdin. 2010. “The Availability and Cost of Short-Term Trade Finance and its Impact on Trade.” OECD Trade Policy Working Papers, No. 98. Paris: OECD Publishing.

OECD. 2010. Trade and Economic Effects of Responses to the Economic Crisis. Paris.

OECD/WTO. 2011. Aid for Trade at a Glance 2011: Showing Results. Paris.

Razzaque, Mohammad, Selim Raihan. 2008. How does Trade Lead to Development and Poverty

Reduction? Evidence from the Field. CUTS International.

Schmidt-Eisenlohr, Tim. 2011. Towards a Theory of Trade Finance. CESifo.

United States Government Accountability Office. 2011. Report to Congressional Requesters. Foreign Assistance: The United States Provides Wide-ranging Trade Capacity Building Assistance, but Better Reporting and Evaluation are Needed. Washington, DC.

US Department of Commerce, International Trade Administration. 2008. Trade Finance Guide: A Quick

Reference for US Exporters. Washington, DC.

21

Attachment B. Evaluation Design Matrix

Evaluation

question Evaluation sub-

question Information required

Information

source(s) Data collection methods

Data analysis

methods Strengths and

Limitations

Part I. What has been IFC’s engagement in trade finance since 2005? (Descriptive)

What are IFC’s

trade finance

products?

Description of programs,

theory, objectives, features,

instruments, and practice

IFC documents, other

relevant literature Document retrieval

Review of program

documents

How and where

has GTFP/GTLP

been used?

Description of trends by

region, type, market, product


relevant literature, IFC

databases

Document retrieval, data

extraction

Review of program

documents,

descriptive

statistics

Part II. Should IFC be in the trade finance business? (Relevance/Additionality)

What market

failures are being

addressed by

IFC’s trade

finance

products?

What is the nature of

the trade finance

insurance market?

Size of the market: trade $$$,

trade finance $$$ (versus

open account), trade finance

insurance, GTFP, by region,

etc.; origins of demand for

trade finance and how it is

met in the market; crisis

versus non-crisis

Relevant literature,

trade finance databases

Literature review, data

extraction

Qualitative

analysis,

descriptive

statistics

What is the market

failure in the

provision of trade

finance that the IFC

programs are

addressing, and does

this justify public

(MDB) intervention?

Description of market

failure—Why does it exist and

what is being done to meet

previously unmet needs? Are

MDBs the only institutions

that can fill the gap? How

does it meet issuing bank and

correspondent bank needs?

Crisis versus non-crisis

Relevant literature, IFC

and MDB staff,

correspondent banks

Document retrieval,

structured interviews, bottom-

up study

Qualitative

analysis,

descriptive

statistics

22

Evaluation



Information


Data analysis


Limitations

Is IFC competing

with other

players in trade

finance?

Who are the private

providers of trade

finance insurance?

Do they compete

with IFC programs or

are there synergies?

What is the size, nature,

advantages of private

providers? Why do they not

pick up the business that IFC is

doing? Comparison of their

offerings versus IFC


trade and trade finance

databases, trade finance

banks and private

insurers, Berne Union

members, IFC staff

Literature review, structured

interviews with banks and

insurers, Berne Union data

Qualitative

analysis and

judgment,

descriptive

statistics

Access to data,

interviewee bias

Who are the public

providers of trade

finance insurance?

Do they compete

with IFC programs or

are there synergies?

List of MDBs, export credit

agencies. Size, nature,

advantages, disadvantages,

who their customers are;

comparison of their offerings

versus IFC and evidence


trade and trade finance

databases, MDBs (ADB,

IaDB, IsDB, EBRD), ECA

staff, IFC staff, Berne

Union members

Literature review, structured

interviews with MDBs, MDB

data, Berne Union data

Qualitative

analysis and

judgment,

descriptive

statistics

Access to data,

interviewee bias

Is the price of IFC

guarantees above,

below, or at market?

Pricing structure of IFC and of

other financial institutions and

reasoning behind it; other

MDB and private provider

data


relevant documents,

databases, IFC staff,

correspondent banks,

other MDBs and private

providers

Literature review, data

extraction, structured

interviews, structured surveys

Review of pricing,

qualitative analysis

Access to data,

data reliability

To what extent

do trade finance

programs

support

achievement of

IFC’s underlying

mission?

How does addressing

market failures in the

provision of short-

term trade finance

support IFC’s goals?

Theory and logframe of access

to trade finance in

contributing to trade, growth,

and development

World Bank and IFC

documents, external

literature

Literature review Qualitative

judgment

What are the

opportunity

costs of trade

finance products

for IFC?

What is IFC giving up

by putting resources

into the trade

finance activities?

IFC resources for this program

versus others? Long-term

investments?

IFC staff, databases,

documents



interviews

Qualitative

analysis,

descriptive

statistics

23

Evaluation



Information


Data analysis


Limitations

Part III. To what extent have trade finance programs met their objectives? (Efficacy)

To what extent

have trade

finance

programs met

their primary

objective of

facilitating trade

in underserved

markets?

What markets are

not being served due

to the market failure

in the provision of

trade finance?

Bank and firm-level data on

effect of IFC trade finance

programs, financial and

qualitative data

Sample IFC trade

finance banks and firms,

sample non-IFC trade

finance banks and firms

Data collected by IFC, direct

collection from sample banks

and firms, case study

interviews, surveys

Sample-based

statistical and

qualitative

analysis;

counterfactual

where appropriate

Limited

applicability of

counterfactual

To what extent have

the programs

reached underserved

markets?

Reach of the programs—low-

tier banks, difficult countries,

conflict situations, SMEs,

critical inputs, south-south,

developing country exports;

other MDB and other private

providers’ comparative data

IFC databases,

documents, IFC staff,

trade finance banks,

other MDB and other

private provider data




interviews, surveys, other

MDB and other private

provider interviews and data

collection

Program-level

statistical analysis,

sample-based

qualitative

analysis,

benchmark against

other MDB and

other private

providers

Definition of

underserved

markets,

comparability with

other MDBs and

private providers

Did access to IFC's

programs help

develop the trade

finance business in

participating banks?

Number of trade finance

products; no of trade finance

clients: (before/after), ways

in which IFC enable business

growth

IFC databases,



country data,

counterfactual: non- IFC

banks, country level

data on access to trade

finance: with/without

IFC




interviews, surveys

Sample-based

qualitative

analysis, statistical

analysis based on

survey data,

counterfactual

analysis

Generalization

based on limited

sample

24

Evaluation



Information


Data analysis


Limitations

To what extent have

the programs

facilitated trade by

building long-term

relationships

between issuing

banks and

correspondent

banks?

How effective and inclusive is

the network of banks? Are

relationships long lasting? To

what extent has trade

business increased among

participating banks? Nature of

graduated banks

IFC databases,



country data,

counterfactual: non- IFC

banks




interviews, surveys

Sample-based

qualitative


analysis based on

survey data,

benchmarking

(limited),

counterfactual

analysis

Generalization

based on limited

sample, adequacy

of data for

benchmarking

To what extent have

the programs

facilitated trade by

building trade-

related capacity in

issuing banks?

Trade Advisory Program

offerings, who is interested in

advisory services and why,

and how has it affected their

business?

IFC staff, banking clients,

counterfactual: non-IFC

banks

Structured interviews,

structured surveys, case study

Sample-based

qualitative


analysis based on

survey data,

counterfactual

analysis

Determining

measurement of

effectiveness,

heavy reliance on

interview findings,

interviewee bias

To what extent have

TF programs helped

improve developing

country firms access

to finance?

Description of firms reached,

reasons for which use

programs, growth patterns in

trade related business

IFC staff, country firms,


firms, other TF

stakeholders not

involved with IFC


structured surveys, case study

Qualitative

analysis,

counterfactual

analysis

Generalization

based on limited

sample,

interviewee bias,

heavy reliance on

interview findings

To what extent

have trade

finance

programs met

secondary goals,

such as helping

IFC enter new

markets, engage

in difficult fragile

and conflict

To what extent have

trade finance

activities enabled IFC

to enter new

markets that it had

not accessed before

and subsequently

developed other

business in these

countries?

Analysis of which countries

IFC operated in without GTFP

versus now, nature of

business in these new

countries. Has it enabled entry

into difficult (post-conflict,

etc.) countries?

IFC databases, IFC staff Data extraction, case study,

structured interviews

Descriptive

statistics,


25

Evaluation



Information


Data analysis


Limitations

states, and

support key

economic

sectors?

To what extent have

trade finance

programs served as a

means for IFC to get

to know lower-tier

banks, build capacity

in them, and do

business with them?

Number of lower-tier banks

involved in program,

description of work done with

these banks and impact

IFC databases, IFC staff,

trade finance banks

Data extraction, structured

interviews, structured survey

Descriptive

statistics,


To what extent

have trade

finance

programs helped

alleviate the

effects of the

global financial

crisis?

Did the sources of

demand for trade

finance change

during the crisis?

Sources of demand before

and after crisis and analysis,

factors driving demand and

changes in demand

Relevant literature, IFC

documents, IFC

database, trade finance

databases




Descriptive

statistics,


Data quality and

reliability

How did the program

change during the

crisis? trade finance

pre-crisis: 2006-08

versus during crisis

08-10

Nature of program before and

after crisis and analysis of

changes

IFC documents, relevant

literature, database, IFC

staff, trade finance

program banks,


banks



interviews

Descriptive

statistics,

qualitative

analysis,

counterfactual

analysis

What particular

negative effects of

the crisis did GTFP/

GTLP help address?

Negative effects of the crisis

on trade finance and GTFP’s

role in alleviating

IFC documents, IFC staff,

relevant literature,

databases

Document retrieval,

structured interviews

Sample-based


What are the main

implications of trade

finance insurance

provision in crisis

versus non-crisis

times?

What were the main factors

that alleviated trade and trade

finance during the financial

crisis? Survey of how

important stakeholder view

GTFP

IFC staff, stakeholders,

trade finance

professionals


structured surveys

Qualitative

analysis

Attribution

problem,

interviewee bias

Are there other

benefits or

shortcomings of

the trade finance

programs that

are not

recognized in

List of other potential benefits

and shortcomings of the

programs

IFC staff, databases, IFC

documents,

stakeholders


extraction, structure


Qualitative

analysis,

descriptive

statistics

Interviewee bias

26

Evaluation



Information


Data analysis


Limitations

IFC’s reporting?

Part IV. Is IFC delivering programs efficiently? (Efficiency)

What is the

utilization rate of

trade finance

activities among

approved banks?

Calculations and analysis of

the utilization rate

IFC databases, IFC

documents


extraction

Descriptive

statistics, literature

review, benchmark

Data reliability

Does the rapid

rate of expansion

of IFC's progams

have any trade-

off?

Is there a trade-off

between extending

coverage to more

banks in one country

vs extending

coverage to a new

country?

Cost of appraisal of additional

bank in known country vs

unknown country

What is the

financial viability

of IFC’s

programs?

What is IFC’s risk

exposure due to

trade finance

activities, and what

could trigger calls?

Calculations and analysis of

risk exposure, threshold to

trigger calls

IFC databases, IFC staff Data extraction, structured

interviews

Analysis of risk

exposure,


Access to data,

barriers to

accurate

quantitative

analysis

What are the

capital usage and

risk exposure

implications of

trade finance

programs for

What have been the

capital usage

implications of trade

finance activities?

Amount of capital used,

comparison with other IFC

programs


IFC documents


interviews, document retrieval

Review of capital

usage for

programs,

qualitative

analysis, literature

review

Access to data,

barriers to

accurate

quantitative

analysis

27

Evaluation



Information


Data analysis


Limitations

IFC?

What are IFC’s

resources allocated

to trade finance

activities?

Capital, staff? Are most costs

fixed or variable?

Proportions?


IFC documents



Review of used

resources in

programs,

qualitative


review

Access to data

What is the profit

contribution of trade

finance activities?

Return on Capital Employed;

comparison with other IFC

programs


IFC documents



Review of profits

in programs,

qualitative


review

Access to data

Part V. Is IFC effectively managing factors within its control? (IFC Work Quality)

Have IFC's

products evolved

with market

needs?

Description of product

evolution and market needs


relevant literature,

relevant stakeholders Data extraction, structured


Review of IFC

products and

others in market,

evolution of TF

market, qualitative

analysis

Are IFC's

monitoring and

reporting

standards for its

TFP adequate?

Quality of current M &E and

reporting


relevant literature


document retrieval

Qualitative


review

Is IFC effectively

managing factors

within its

control?

Do IFC’s programs

meet industry

service standards in

the delivery of trade

finance products?

Comparisons of response

time; information technology

platform, speed of decision-

making; adequacy of tenure

and limits

Databases, IFC

documents, other

relevant documents, IFC

staff, trade finance

professionals




Literature review,

descriptive

statistics,


Access to data,

interviewee bias,

generalization

based on limited

sample

Evaluation of the International Finance Corporation's Short-Term Trade Finance Programs, 2006

Documents

Transcript of Evaluation of the International Finance Corporation's Short-Term Trade Finance Programs, 2006