“You have to change the way you look at risk”

On the sidelines of our Private Sector 25^th anniversary event in June, we spoke with Saif Malik, Standard Chartered Bank CEO for UK and Regional Head of Client Coverage for the UK & Türkiye, seeking his views on how to go "from billions to trillions" in partnership with the private sector. 

When it comes to trade finance for urgent development needs, why do we need strong partnerships between the public and private sectors?

One of the things that we talked about on our panel was collaboration — and collaboration is a critical factor for the public and private sectors not just to flourish, but also to succeed. We've got a great example between our two institutions. We set up with the OPEC Fund about 15 years ago, just after the global financial crisis, when global trade volumes dropped drastically because banks suddenly stopped issuing trade facilities. We worked with the OPEC Fund and put up a “trade participation agreement”, whereby the OPEC Fund would guarantee facilities that we would issue.

The OPEC Fund’s backing has allowed us to open up trade finance facilities with over 200 institutions in 20 markets, mostly in the Global South. That's a real-life example of why we need to collaborate and get risk mitigation facilities in place. Collaboration allows the private sector to continue doing what we do best, in our case being a trade bank.

Key markets are emerging across Central and South Asia. How can we safely and responsibly maximize opportunities? 

Our main network is Africa, Asia and the Middle East. We're a global trade bank that operates in 53 markets and we have 90,000 people. But we are also able to work in markets where we don't have a presence, including some in Central Asia, by collaborating with development finance institutions (DFIs) and multilateral development banks (MDBs). Take for example Uzbekistan, where we’ve recently done some great deals with the government. Here we've also worked with blended finance providers, in this case with an export credit agency, UK Finance. On the back of that, we've also worked with other development organizations, providing the opportunity for further expansion.

But it's never enough though, is it? If we talk of going from billions to trillions, how can we get more private sector on board? What are the most useful policy reforms and risk-sharing tools?

By recent estimations, the world will need US$4.2 trillion annually for the next six years to achieve our UN 2030 Agenda. That's moved up from US$2.1 trillion just before COVID-19, so within a five-year span. That's going to continue, so there's going to be enough for everyone to do. The DFIs and MDBs are not going to be able to do that by themselves, nor are we in the private sector. So it's about how do we work together?

Further questions include: How do we change the way MDBs and DFIs work together? How do we crowd private sector into the deal? For sure it’s not by competing with us on the financing, but rather by giving guarantees. We've looked at some numbers and for every US$1 of guarantee a DFI puts on the table, we're able to provide or raise US$2 of financing. That's stretching capital a long way.

So for us, it's really about thinking out of the box and saying: How do we become a bit more innovative? It also means that development organizations have to change the way they look at risk, at their own risk mitigation, as well as their appetite in different markets.

The other aspect is: How do you risk share between DFIs? If you have an African DFI or MDB, how can they move some of their assets to another institution in another part of the world that may have zero exposure in Africa? In other words, “swap” assets and exposures, so they can have a more diverse portfolio — as opposed to having all Africa risk and being limited from taking on more exposure. We need to stretch what financing is available, so that everyone can get a piece of it.