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, working capital financing and unfunded risk participation. 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 fertilizers and seeds, prompting OFID to increase its support to exports of strategic food products from partner countries. With the decline in oil prices, a number of partner countries increased their volume 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 a 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 2015
In terms of actual commitments, OFID approved a total of US$278.9m through the TFF in 2015, the biggest share (US$158m) channeled via financial intermediaries to support the import and export funding needs of SMEs, including three transactions in Turkey and two countries new to the TFF: Cameroon and Guatemala. Also of note was a first direct trade finance loan to a bank in Burkina Faso.
Further reading: OFID supports Turkey’s international trade financing through Şekerbank
OFID signs first-ever trade finance loan for Guatemala
OFID signs first-ever bilateral trade finance loan for Burkina Faso
The remaining US$121m comprised five 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 commodities.