MICROCAPITAL BRIEF: International Finance Corporation (IFC) to Provide Kotak Mahindra Bank of India with Trade Financing Line of $51m to Lend to Small and Medium Enterprises (SMEs) Involved in International Trade

The International Finance Corporation (IFC), the investment arm of the World Bank, is set to provide a trade financing line of USD 51 million to Kotak Mahindra Bank, an Indian commercial bank, to lend to small and medium enterprises (SMEs) involved in international trade [1,2,3]. The line is part of the IFC’s Global Trade Finance Program, a USD 3 billion program intended to allow banks to “deliver trade financing by providing risk mitigation in new or challenging markets where trade lines may be constrained” [4]. Kotak Mahindra is the first Indian bank to be supported under this program [1]. MicroCapital has reported on the participation of other banks in this program, including Bank Respublika of Azerbaijan [5]. Dipak Gupta, the Executive Director of Kotak Mahindra Bank, has stated the importance of the line in allowing the bank to provide “a wider base of short-term foreign-currency trade finance products” [1].

By Christopher Maggio, Research Assistant

About:
Kotak Mahindra Bank

Description:
Kotak Mahindra Bank is a private bank based in Mumbai, India. It is under the umbrella of the Kotak Mahindra Group, which also offers stock brokerage, mutual funds, life insurance, and investment banking. The bank was originally founded in 1985 as Kotak Capital Management Finance Limited, a non-banking financial organization. In 2003, it was converted into a bank. In November of 2009, Kotak Mahindra Bank began involvement in the International Finance Corporation’s Global Trade Finance Program, receiving a trade financing line of up to USD 51 million to lend to small and medium enterprises (SMEs).

Kotak Mahindra Bank does not report to the MIX Market, the microfinance information clearinghouse.

Organization’s Website

http://www.kotak.com/Kotak_BankSite/personal/default.htm

Just the Facts:

-Country of Incorporation: India
-Year Founded: 1985 (as Kotak Capital Management Finance Limited)
-Legal Status: Private Bank
-Area of Operation: Global
-Participant(s)/Backer(s)/Investor(s): Kotak Mahindra Group
-Products: Deposit Accounts, Loans, Investment Services, Business Banking Solutions, Treasury and Fixed Income Products
-Fund Currency: INR

Contact Information:
+91 22 6600 6022.

https://www.kotak.com/contactus/contactus.php

Additional Resources

UNAUDITED FINANCIAL RESULTS FOR THE QUARTER AND HALF YEAR ENDED SEPTEMBER 30, 2009: http://www.kotak.com/Kotak_BankSite/personal/default.htm#

About the International Finance Corporation (IFC):

A member of the World Bank Group, IFC uses loan and debt securities, equity investments and guarantees as instruments of poverty alleviation. It “invests in companies and financial institutions in emerging markets” as well as providing technical assistance. The IFC has 182 member countries that “collectively determine its policies, and approves investments.” In fiscal year 2009, its new investments totaled USD 14.5 billion.

Bibliography:
[1] IFC press release enetitled ‘IFC Financing Line to India’s Kotak Mahindra Bank to Support Small Business’:http://www.ifc.org/ifcext/media.nsf/content/SelectedPressRelease?OpenDocument&UNID=D458DA77EFEF98568525767700579270
[2] IFC: http://www.ifc.org/
[3] Kotak Mahindra Bank: http://www.kotak.com/Kotak_BankSite/aboutus/default.htm
[4] Global Trade Finance Program: http://www.ifc.org/ifcext/gfm.nsf/Content/TradeFinance
[5] MICROCAPITAL STORY: IFC invests USD 20 million In Bank Respublika Intending to Boost Finance for Azerbaijan’s Businesses: https://www.microcapital.org/microcapital-story-ifc-invests-usd-20-million-in-bank-respublika-intending-to-boost-finance-for-azerbaijans-businesses/

Source Article:

Mumbai/Chennai, India, November 23, 2009—IFC, a member of the World Bank Group, will provide a trade financing line of up to $51 million to India’s Kotak Mahindra Bank to help support small and medium enterprises that have suffered reduced access to finance due to the global financial crisis.

IFC’s trade finance facility will provide Kotak Mahindra Bank with risk coverage and access to a global network that will help grow the bank’s trade finance business. The network facilitates transactions in challenging markets, promotes competitive financing, and builds correspondent bank relationships with new institutions at low risk. This is the first bank IFC has supported in trade finance in India under its Global Trade Finance Program.

Lars Thunell, IFC Executive Vice President and CEO, said: “IFC’s support to Kotak Mahindra Bank reflects our commitment to help businesses in India and other emerging markets overcome the effects of the global economic crisis, including by expanding the availability of trade finance.”

The trade facility will improve Kotak’s ability to provide short-term trade funding for smaller businesses, which is vital given their reduced access to foreign currency financing amid the ongoing global financial crisis.

Dipak Gupta, Executive Director, Kotak Mahindra Bank, said: “This important transaction, with our long- standing partner IFC, will help us provide a wider base of short-term foreign-currency trade finance products.”

After the global economic slowdown, the scarcity of trade financing has posed a particular economic risk to low- and middle-income countries. IFC, working with its partners, has sharply increased its trade financing efforts over the last year.

IFC is the only international financial institution focused exclusively on the private sector, the engine of sustainable development in emerging markets. Along with IBRD, it is currently seeking a capital increase to strengthen its ability to create opportunity for the poor in developing countries—including by supporting trade financing benefiting small businesses in India.

To learn more about IFC’s activities in South Asia, visit www.ifc.org/southasia.

http://www.ifc.org/ifcext/media.nsf/content/SelectedPressRelease?OpenDocument&UNID=D458DA77EFEF98568525767700579270

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