A well-functioning financial sector is critical to poverty alleviation and development. By increasing competition, it keeps interest rates low, thus making credit more accessible and raising the level of savings available for productive investment. It also represents the link through which countries access trade and capital flows, and provides financial services to MSMEs (Micro, Small & Medium Enterprises), which are a crucial source of employment creation.
OFID’s key goals for the sector are to directly address the needs of MSMEs, to support the development and diversification of financial systems, and to increase the range and efficiency of financial products and services.
Priority is given to MSMEs, a sector with an estimated financing gap of over $2tr. OFID channels its supports through:
With funding constraints continuing in the wake of the 2008 financial crisis, OFID and other DFIs maintained scaled-up support to the financial sector in 2013. In addition to coordinating with other DFIs to address the liquidity and capital needs of financial intermediaries in its partner countries, OFID also provided bilateral facilities to a range of financial institutions worldwide, with the aim of supporting investment, trade and other essential flows.
In total, a record US$332m was approved in favor of the financial sector in 2013, for a total of 22 operations covering all developing regions of the globe. This represents an increase of more than 83% over commitments in 2012.
The largest share of the funds (68.4%) was channeled through OFID’s Trade Finance Facility, with 13 transactions amounting to US$227m helping to bolster capital markets and the import and export funding needs of SMEs.
Under the Private Sector Facility, lines of credit worth US$105m were extended to financial intermediaries in Azerbaijan, Cambodia, Ghana, Kenya, Paraguay and Rwanda in support of their MSME portfolios, and to regional institutions in Africa and Latin America mainly for infrastructure projects.