The financial sector is critical to development and poverty alleviation in different ways. It:
Banking is the basic building block of any country’s financial sector for mobilizing household savings and providing credit. For OFID, the most efficient way to channel resources to MSMEs is through local intermediaries, often commercial banks. However, Non-Bank Financial Institutions (NBFIs), such as leasing companies, can also be a very effective means of providing small entrepreneurs with credit. For this reason, OFID has been instrumental in establishing new NBFIs, and has channeled support to new commercial banks, as they help to expand and deepen local capital markets.
In general, OFID’s key goals are to support the development of financial systems, to widen the diversity of institutions and promote competition, and to increase the range and efficiency of financial products and services.
In 2012, US$181.6m was approved through OFID’s Trade Finance and Private Sector windows for a total of 10 operations covering all developing regions of the globe. This represents an increase of more than 50% over commitments in 2011. Under the Private Sector Facility, lines of credit worth US$35m were extended to support the activities of MSMEs in Azerbai jan, Paraguay and Sri Lanka, while US$146.6m approved through the Trade Finance Facility will help bolster capital markets as well as the import and export funding needs of SMEs in a large number of countries.