Structured finance

Structured Finance is normally defined as a service offered by financial institutions for companies with very unique financing needs. These needs usually don't match conventional financial products such as a loan. Structured finance generally also involves highly complex financial transactions.

Library Resources

resource title type year resource
Asset-Based Finance Paper 2010

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This resource appears in: Structured finance

This white paper provides U.S. government program designers with a basis of technical understanding on asset-based financing as an approach to meet the operation and expansion needs of SMEs. It summarizes seven types of asset-based financial products, when and how they may be used in technical assistance interventions, and the programmatic prerequisites necessary to develop a project that provides or reinforces access to asset-based finance as a financing practice for banks and non-bank financial institutions.

The products reviewed in this paper are: accounts receivables (A/R) finance, warehouse receipts (WHR), purchase order finance (POF), factoring, leasing, asset-backed securities, and a few of their equivalents in Islamic finance.

Author USAID
Publisher USAID
Number of Pages 27 pp.
Primary Language English (en)
Region / Country Global
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The use of Structured Finance instruments in agriculture in Eastern Europe and Central Asia Paper 2009

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The document introduces and illustrates the leading products and innovations in SF in the region. It also strives to analyze the results and make recommendations from the lessons learned in the region and elsewhere. Structured Finance for agriculture has shown promise for wider replication in the Eastern European and Central Asian region, but a lot more research, innovation and improvements in the enabling environment are needed before it can be universally implemented across the region or elsewhere. The global financial crisis in 2008 brought to light many problems when the use of SF products was not managed properly and not supervised adequately, resulting in caution for their use in the future. The problems that arose stem largely from the poor quality of assets that were bundled together, rather than the structured instruments themselves. The economic crisis that followed and accentuated the financial crisis has been especially difficult for the Eastern European and Central Asian region. Consequently there is an increased shortage of available financing and coupled with an increase in security requirements make the need for SF far more important as an option to increase agricultural financing within and to the Eastern European and Central Asian region.

The document is intended for people and organizations working in or with finance who are interested in expanding their offer of financial services to agriculture and agribusiness through use of additional tools and approaches. It is also for agribusiness leaders who are looking for opportunities to increase their access to finance through the use of SF approaches. Finally, the document contains lessons, examples and policy recommendations for policy-makers and public investors who want (and require) an orientation to the use and practicality of SF in the region and/or the conditions required for use of such products.

Author Winn, M.; Miller, C.; Gegenbauer, I.
Publisher Food and Agriculture Organization of the United Nations (FAO)
Number of Pages 94 pp.
Primary Language English (en)
Region / Country Global
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What is Structured Finance? Paper 2005

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This brief article defines structured finance (SF) in the way that SF encompasses all advanced private and public financial arrangements that serve to efficiently refinance and hedge any profitable economic activity beyond the scope of conventional forms of on-balance sheet securities (debt, bonds, equity) in the effort to lower cost of capital and to mitigate agency costs of market impediments on liquidity. In particular, most structured investments (i) combine traditional asset classes with contingent claims, such as risk transfer derivatives and/or derivative claims on commodities, currencies or receivables from other reference assets, or (ii) replicate traditional asset classes through synthetication. Structured finance is invoked by financial and non-financial institutions in both banking and capital markets if established forms of external finance are either (i) unavailable (or depleted) for a particular financing need, or (ii) traditional sources of funds are too expensive for issuers to mobilize sufficient fund for what would otherwise be an unattractive investment based on the issuer’s desired cost of capital.

Structured finance offers the issuers enormous flexibility in terms of maturity structure, security design and asset types, which allows issuers to provide enhanced return at a customized degree of diversification commensurate to an individual investor’s appetite for risk. Hence, structured finance contributes to a more complete capital market by offering any mean-variance trade-off along the efficient frontier of optimal diversification at lower transaction cost. However, the increasing complexity of the structured finance market, and the ever growing range of products being made available to investors, invariably create challenges in terms of efficient assembly, management and dissemination of information.

Author Andreas A. Jobst
Number of Pages 7 pp.
Primary Language English (en)
Region / Country Global
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Potential Applications of Structured Commodity Financing Techniques for Banks in Developing Countries Study Guide 2001

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This paper describes a number of financial techniques that can be used by developing country banks to open up new financing possibilities in the commodities sector. The first chapter discusses these various techniques, which can most easily be used in the commodity sector but which can also be adopted by industries servicing the commodity sector, and for financing on the basis of "commoditized" income streams. The second chapter highlights some of the practical models that developing country banks might apply, and concludes.

Author UNCTAD
Publisher UNCTAD
Number of Pages 45 pp.
Primary Language English (en)
Region / Country Global
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