Private Sector Operations

PrivateSector 2017

 

OFID’s private sector and trade finance windows are a complementary means for OFID to fulfil its core mission of assisting partner countries in their socioeconomic development. Both mechanisms are important contributors to creating lasting development impact in beneficiary countries and to OFID’s financial sustainability.

Private sector activities promote economic development through financing the establishment and / or growth of productive private enterprise and encouraging the development of local capital markets. OFID provides: loans to companies for projects with developmental aims that are well defined, such as to improve industrial capacity and utilities, and strengthen infrastructure; direct equity investments or investments in private equity fund structures targeting OFID’s sectors of interest; and term loans to financial institutions for on-lending to MSMEs and to improve the capital base of banks. 

Through trade finance, OFID supports private enterprises and governments by facilitating their import and export requirements. This helps address inventory and working-capital needs and improves the cross-border trade prospects of partner countries. OFID’s trade financing window provides: direct financing or participation in risk sharing programs to support financial  institutions and the growth of their international trade activities; and trade financing across the value-chain, including  structured commodity finance, working capital finance and pre-export finance to private enterprises or governments.

The private sector and trade financing windows have a global remit, supporting projects and companies in over  60 countries across Africa, Asia, Latin America and Europe. Financing has benefited more than 375,000 MSMEs as well as trade activities via financial institution intermediaries. Via unfunded programs, 7,627 beneficiaries through 328 issuing banks in 63 countries have also been supported. More than  one-quarter of these countries are classified as low income countries.
 
Projects have enabled the development of more than 3 GW of electricity capacity across multiple technologies and have supported airports with aggregate passenger numbers of 28 million per annum, as well as seaports and bulk terminals with vast handling capacity – all of which underpins significant amounts of international trade and supports economic growth. 

 

Activities in 2017


2017 saw OFID’s private sector and trade finance operations continue to scale up. Approvals during the year totaled US$787.5 million, up from US$711.5 million in 2016, representing an increase of nearly 11%. There was a heavy emphasis on trade finance with total approvals amounting to US$535 million (as part of the  US$787.5 million). 

Commitments to the energy sector, including renewable projects and midstream and downstream projects, made up US$384 million of the total approvals. The financial sector attracted US$210 million and agriculture attracted US$118 million. The remainder was approved for industry, health and multisectoral projects, the latter of which supported retail, cement and regional trade in Africa.  

Growth was helped by diversification across these sectors and the use of a broad spectrum of instruments. Senior and subordinated debt, guarantees and equity was employed across a variety of institutions such as local and regional banks, financial institutions and leasing companies. OFID’s private sector and trade finance operations continued to illustrate the beneficial role of partnerships, concluding a first transaction with the Black Sea Trade and Development Bankthe multilateral development bank of the 11 founding member countries of the Organization of the Black Sea Economic Cooperation.  

The department also acted as a catalyst by mobilizing additional funding for a number of beneficiaries. Also signed in 2017 was a cooperation agreement with the Africa Finance Corporation that will enable OFID to help address the continent’s energy and infrastructure needs.

Signing up to the Development Finance Institutions Corporate Governance Development Framework in March 2017, OFID became a member of the DFI Corporate Governance Group which comprises 35 members. The Framework provides a common approach for evaluating and improving corporate governance and sound credit and investment practices in some of the world’s most challenging markets.  

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