Trade Finance Facility

OFID’s Trade Finance Facility (TFF) targets transactions to facilitate import and export activities and to address working capital requirements in developing countries. The general principles guiding the Facility include developmental impact, South-South cooperation and additionality. TFF operations are available to governments, private entities, commercial banks, regional DFIs and any other institution active in an OFID partner country. OFID products include import-, export- and pre-export financing, warehouse receipt financing, SME trade support, working capital financing and unfunded risk participations. Instruments include conventional loans as well as Sharia-compliant financing facilities.

Five years after the 2008 financial crisis, the repercussions continued to be felt throughout the market in 2013. Although global trade lending improved, access to finance remained lower than pre-crisis levels, especially for emerging markets. Commercial banks remained selective, restricting the availability of trade financing for developing countries, thus making the role of DFIs even more important. A number of DFIs increased their trade finance capacity to bridge this gap. Credit accessibility was further impacted by the more stringent regulations anticipated under the revised Basel III Framework. SMEs in developing countries were worst affected by the reduced availability and higher cost of credit.

Activities in 2013

Throughout 2013, OFID used all means at its disposal to rise to these challenges, approving a total US$227m for 13 TFF operations, all of them funded.

These resources will support: the import and export funding needs of SMEs in countries and regions around the globe, including Mongolia and Papua New Guinea, both of them new markets for OFID’s TFF.

Also approved was a US$200m increase in the ceiling of an existing global trade participation scheme with the International Islamic Trade Finance Corporation (ITFC). Transactions drawn from the ITFC scheme in 2013 numbered eight with an aggregate amount of US$213m and including first-time TFF loans in Jordan and Kazakhstan.

Of particular note was the strengthening of operations in the Latin America and the Caribbean region and the broadening of cooperation to a larger number of banks.

By end 2013, OFID TFF operations benefitted over 300 local and regional banks in 57 emerging markets. This was the result of enhanced business development and networking activities.