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.
In the past year, there has been a stronger demand in the import of agricultural products such as fertilisers and seeds, prompting OFID to increase its support to exports of strategic food products from partner countries. With the decline in oil prices later in the year, a number of partner countries increased their volumes of imports. This opened up opportunities for the TFF to enhance its activities in this space. The Facility has also been expanding geographically. In addition to maintaining our strong footprint in the low-income countries, larger economies, such as the main trading middle-income countries, have become focus areas for the Facility.
Activities in 2014
In terms of actual commitments, OFID approved an aggregate US$433.3m through the TFF in 2014, the bulk of it (US$302m) in nine transactions drawn from an existing global trade participation scheme with the International Islamic Trade Finance Corporation. These funds facilitated the import of petroleum products and agriculture inputs by partner beneficiary countries as well as exports of strategic agricultural crops.
The remaining resources were allocated to support the import and export funding needs of SMEs, mostly in countries of the LAC region and including three countries new to the TFF: El Salvador, Panama and Peru. Also approved in 2014 was an increase in unfunded trade finance operations, including a US$250m rise in the ceiling of a global risk-sharing scheme with Standard Chartered Bank, and a new program with a large pan-African bank, to which OFID is contributing US$50m.