ADB offers $200 million financing for firms fighting COVID-19

MANILA, Philippines — The Asian Development Bank (ADB) announced yesterday that it is making available $200 million in supply chain financing for companies manufacturing and distributing personal protective equipment and medicines essential to the control of the spread of the 2019 coronavirus disease (COVID-19).

Funding will be drawn from the multilateral bank’s Supply Chain Finance Program (SCFP) and will be  extended to firms that want to increase their output to cope with higher demand but are feeling the strain in terms of additional working capital and other requirements.

“The support will target companies in the supply chain that are critical to fighting the virus,” said Steven Beck, ADB’s head of trade and supply chain. “We’re looking to support companies that want to ramp up production and therefore need to engages suppliers.”

ADB will be working with partner commercial banks in the provision of assistance to selected companies. Once approved for assistance, funds can be provided within weeks.

The bank’s SCFP provides bridge financing for suppliers who receive payments over a period of 120 to 180 days after delivery and acceptance of goods by buyers. This long waiting period for payments at invoice due date puts pressure on working capital.

SCFP works by allowing suppliers to request advance payment from ADB’s partner finance institutions after the buyer makes a commitment to pay. The partner banks then receives the payment from the buyer at the invoice due date.

Funding under this program is extended to small and medium enterprises (SMEs) from ADB developing member countries that have a minimum of two years relationship with their buyers as well as a solid production and delivery track record.

Other than providing funds, ADB shares in risks carried by these transactions.

“ADB is closely monitoring the impact of COVID-19 on trade finance and is in regular contact with client banks to assess whether additional support is required,” the bank said.

With the assumption that a single pool of supply chain finance is typically used for a subsequent delivery over a period of 120 up to 180 days, the $200-million facility would support around $500 million of financing over 12 months.

ADB’s response to the COVID-19 pandemic to date includes $2 million announced on Feb. 7 to enhance detection, prevention, and response in the People’s Republic of China and the Greater Mekong Subregion; another $2 million announced on Feb. 26 to support response in all its developing members; and a $18.6 million private sector loan, signed on Feb. 25, to Wuhan-based pharmaceutical distributor Jointown Pharmaceutical Group Co. Ltd. to support the continued supply of essential medicines and personal protective equipment.