WASHINGTON, June 16 (Reuters) - The International Finance Corp and Bank of Bank of Tokyo-Mitsubishi on Tuesday agreed to provide a $60 million trade financing line for Export-Import Bank of India to assist small businesses hit by the sharp drop in global trade.
It is the first time that IFC, the World Bank's private sector lender, has provided credit to an export credit agency to help finance trade flows hurt by the scarcity of credit.
Until now, IFC has focused a global trade liquidity program, aimed to address a shortage of trade financing caused by the global credit squeeze, on banks.
The new deal, the first under the IFC's Export Credit Agency initiative started in May, will enable Exim Bank of India to support export-orientated small and medium enterprises.
The global financial crisis has dramatically cut global trade activity and has especially affected small and medium-sized businesses, which have struggled to afford to rising costs of trade finance.
Group of 20 member nations agreed in April to increase trade finance for developing countries through institutions like the World Bank.
"It is clear that urgent action on trade is needed," said Lars Thunell, IFC executive vice president and chief executive officer. "The scale and depth of the crisis demands a coordinated response."
Besides reviving trade activity in a key emerging market, IFC hopes the agreement with Exim Bank of India will also encourage trade investment.
Still, Thunell said it was a "small dent in a big problem."
Georgina Baker, director of short-term finance for IFC's global markets division, said the agreement was part of several efforts by IFC to ease trade financing constraints. The World Bank has estimated the trade finance gap at between $100-$300 billion.
"Because of the nature of the crisis we are reaching out to every kind of entity that have some type of role in trade," Baker said.
(Reporting by Wendell Marsh. Editing by Bernard Orr)
(wendell.marsh@thompsonreuters.com; Tel: +1 202-789-8554))