Emerging Market Lender Faces Liquidity Crisis Amid Audit Dispute

An emerging market trade lender, TriLinc Global Impact Fund (TGIF), is grappling with a severe liquidity issue that has halted both investor payouts and new loan funding. This predicament stems from an ongoing disagreement with its former auditor over the valuation of non-performing loans within its portfolio. TGIF specializes in providing trade finance and term loans to small and medium-sized enterprises (SMEs) in developing nations, yet a significant portion of these investments have encountered challenges, with approximately 60% exhibiting notable performance weaknesses.
The fund's operations span regions such as Argentina, Ecuador, Nigeria, and Uganda—areas heavily impacted by the global shortage of trade finance from traditional banking institutions. Despite reaching a peak in total assets valued at US$403 million in 2018, recent unaudited reports indicate a decline to US$288.5 million as of March this year. A major concern arises from 14 loans worth around US$100 million, where TGIF expresses doubts regarding timely repayments. The company attributes much of its financial downturn to the lingering effects of the Covid-19 pandemic, which disrupted supply chains globally, thereby complicating borrowers' ability to fulfill their obligations.
In response to its liquidity constraints, TGIF is actively exploring various strategies to stabilize its financial position. These include selling off portions of existing investments, seeking new credit facilities, and pursuing additional financing options to bolster cash flow. Legal action against its former auditor, RSM, highlights the complexity of the situation. TGIF asserts that RSM's abrupt resignation exacerbated its financial woes by triggering breaches in loan covenants with development finance lenders, necessitating the repayment of approximately US$18 million in borrowings. Meanwhile, RSM counters that it lacked adequate information from TGIF to complete necessary audits, leading to its decision to step down.
Established in 2013, TGIF aims not only to generate competitive returns for investors but also to create positive economic, social, and environmental impacts in underserved markets. While navigating current challenges, the fund remains committed to its mission of fostering sustainable growth. This commitment underscores the importance of resilience and adaptability in overcoming obstacles, reinforcing the broader message that even amid adversity, proactive measures can pave the way toward recovery and renewed prosperity. By addressing liquidity issues and enhancing transparency, TGIF exemplifies how organizations can strive towards long-term stability and success despite unforeseen setbacks.