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South Korea’s big digital supply chain play

The Export-Import Bank of Korea (KEXIM) and Deutsche Bank have announced a US$30m revolving credit facility aimed at supporting the competitiveness of the Korean export apparel industry.

As a part of this facility, KEXIM will acquire the export receivables of Korean apparel exporters generated from the supply of clothing to Gap from Deutsche Bank, Gap's key trade finance bank. This collaboration should benefit Korea’s apparel industry suppliers by supporting financing liquidity and reducing their cost of financing. Furthermore, as the entire digital supply chain finance process is paperless between suppliers, their buyers, and the financial institutions supporting them, operations are made more efficient with shortened processing times.

"As a global leader in supply chain finance, finding new ways to make cross-border trade easier and more efficient for our clients is core to our business," commented David Lynne, APAC head of Corporate Bank and Fixed Income & Currencies at Deutsche Bank. "Collaborating with KEXIM on this groundbreaking solution, a first of its kind for an export credit agency, is a prime example of how we can support buyers with a more diversified pool of suppliers and help suppliers optimise their cash flows. Innovative approaches like these strengthen domestic industries and global supply chains simultaneously."

Entering the digital supply chain market

This marks the first time that KEXIM is entering the digital supply chain market. Going forward, KEXIM plans to support digital supply chain finance in earnest in order to help smooth operations for Korean suppliers and boost competitiveness for Korean industry

"We are delighted to be entering the financial supply chain market, and to be partnering with Deutsche Bank, an undisputed leader in this space," said Lee Jae-hong, director general, Trade Finance Department at The Export-Import Bank of Korea. "Healthy, efficient financial supply chains are crucial to the strength of the Korean export sector. We are keen to play a constructive role in supporting Korean exporters, directly and indirectly, in the financial supply chain and will increasingly explore opportunities to do so."

Interbank credit facility with Jordanian bank 

The Deutsche Bank deal is the latest significant splash by KEXIM, which also recently signed a framework agreement for interbank credit facility amounting to US$1.3bn with Jordan's Housing Bank for Trade and Finance (Housing Bank). 

The interbank credit facility is a financial arrangement whereby KEXIM extends a credit line to a foreign bank in major export and investment target countries, from which the latter draws funds to lend to local companies transacting with Korean companies. 

Since Jordan is considered as a logistics hub in the Middle East, KEXIM established a credit line with the Housing Bank. It is the first interbank credit facility that the Bank established in the region, aiming to help Korean companies increase market share in their major export items such as automobiles and home appliances and win reconstruction projects in Iraq. 

The partnership will leverage Housing Bank's growing financial network throughout Jordan to streamline trade and the exchange of funds between the two countries. The framework agreement will allow for easier exports of goods and services from Korea to Jordan, the procurement of essential equipment by Jordanian importers working on reconstruction projects in neighbouring countries, and the purchase of Korean-made goods through flexible financing options. Housing Bank will also be able to issue letters of credit on behalf of its clients in favour of Korean exporters.

"We are proud to join this partnership agreement with KEXIM" commented Ammar Al-Safadi, CEO of Housing Bank. "This agreement will have a far-reaching positive impact on trade relations between Jordan and Korea, allowing local businesses to conduct large-scale financial operations in an easy and efficient way." 

Al-Safadi further noted that such agreements and the streamlined trade routes they establish have become even more integral following the COVID-19 pandemic and the deleterious effect it has had on economies globally, particularly for resource-limited countries like Jordan. He noted that the availability of quality financing options will enable Jordanian importers and other businesses to conduct their transactions in a more flexible manner, paving the path for the post-COVID economic recovery.

Officials from Korean companies operating in the region, including Hyundai Motor, Samsung Electronics, and LG Chem also attended the signing ceremony and expressed high expectations for the use of the finance to expand exports in the region.

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