OFID’s Trade Finance Facility (TFF) targets developmentally and socially sound 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.
Activities in 2012
The year 2012 was characterized by adverse market conditions, including a worsening of the economic situation in Europe that led to a retrenchment of major European commercial banks from developing countries and a US dollar credit crunch. In addition, developments in the MENA region resulted in additional requirements; these were coupled, however, with increased risks. Credit availability was further impacted by the more stringent regulations anticipated under the revised Basel III Framework, which also applies to short-term, low-risk trade finance instruments. SMEs in developing countries were worst affected by the reduced availability and higher cost of credit.
In response to these challenges, OFID strengthened relations with its major partners, including other DFIs and large international commercial banks, and expanded its program in 2012, with approvals for the year amounting to US$491.6m. Of this total, US$441.6m was committed for funded operations and divided between the multi-sectoral (45%), financial (33%) and energy (22%) sectors. Transactions financed included the import of oil products and support to SMEs. In terms of regional distribution, 28% went to Africa, 21% to Asia and 6% to Latin America, while 45% represented a US$200m global co-financing scheme with the International Islamic Trade Finance Corporation. Of particular note was the strengthening of operations in the MENA region, mostly for strategic commodities, as well as transactions in markets new to the TFF, namely Colombia, Georgia and Lebanon. The year also saw the approval of a $50m risk-sharing program with the Banque du Commerce et du Placement and the renewal of funded and unfunded transactions for a total of US$224m. Efforts were also made to expand OFID’s partnership network. Involvement in operations with such partners had a catalytic role for some beneficiary countries.
Away from the operational front, OFID undertook a number of key institution-building initiatives. These included the publication of an information brochure and the strengthening of monitoring tools to control and report on risk. The institution also received a special mention in the final voting for awards of excellence from two leading trade finance magazines.