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FINANCIAL
The financial sector is critical to development and poverty alleviation in different ways. It:
- mobilizes savings and allocates them to investment purposes
- provides the link through which countries access trade and capital flows
- provides the mechanism through which financial transfers are made and foreign exchange conversions can take place
- contributes directly to poverty reduction by providing savings and credit facilities to micro-, small- and medium-scale enterprises (MSMEs) which are critical to employment creation
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.
Throughout 2011, OFID continued to participate in coordinated action with other development finance institutions to address the liquidity and capital needs of banks in its partner countries, where the financial crisis has cut remittances and reversed capital flows. This is impacting on capital market stability and constraining access to finance for MSMEs and households. To help ease this situation, OFID has lent its support to initiatives such as the Africa Bank Capitalization Fund, the Microfinance Enhancement Facility and the Global Trade Liquidity Program. In addition, OFID is partnering with leading commercial banks to maintain and enhance credit capacity for financial institutions in emerging markets. It is also providing bilateral facilities to a range of financial institutions worldwide, with the aim of averting declines in economic activity that would adversely and disproportionately impact low-income groups.
In 2011, US$114.8 million was approved through OFID’s private sector and trade finance windows for a total of 10 operations with a combined outreach to all developing regions of the world. Among the approvals were an equity investment in the multi-regional Energy Access Fund, a fifth line of credit to Afreximbank, and several additional lines of credit to support trade finance, capital markets development and MSMEs.
Government Assistance (HIPC BOP)
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Poverty reduction (Rehabilitation & Social infrastructure)
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National Development Banks
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