Private Sector Operations

OFID’s private sector and trade finance operations 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 over 500,000 MSMEs as well as trade activities through financial institution intermediaries. Via risk-sharing programs, over 7,000 beneficiaries through more than 300 issuing banks in 60 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 3.6 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.

Private sector and trade finance operations display clear development impact by supporting initiatives that create and maintain employment, and improve production and lending capacity. These facilities also aim to: support underserved segments of, or gaps within, the market; improve competition; increase quality while driving down consumer prices; provide long term and / or risk capital; and prioritize economic sectors that have a multiplier effect on socioeconomic development.

Activities in 2018

OFID’s private sector and trade finance operations remained robust during 2018, with approvals during the year totalling US$746.02m. There was a strong emphasis on trade finance, with total approvals amounting to US$538.14m (as part of the US$746.02m).

Commitments to the energy sector made up US$307.9m of the total approvals. The financial sector attracted US$242.2m and agriculture US$95.2m. The remainder was approved for industry (US$55m) and health (US$46m) projects.

Growth was helped by diversification across these sectors and the use of a broad spectrum of instruments.