Improving the SMEs Access to Trade Finance DRAFT
in the OIC Member States
6
These elements are provided in varying degrees by banks, boutique trade finance firms, export
credit agencies and international financial institutions.
Table 1: Four Elements of Trade Finance
Source: OPUS Advisory Services International Inc.
It should be noted for the sake of clarity that these four elements are not necessarily separate
and distinct. That is to say, certain payment mechanisms also allow for the option to provide
financing as well as risk mitigation. Techniques or products that are perhaps aimed primarily
at the provision of financing will naturally in the end also enable settlement or payment to the
exporter, and finally, solutions aimed at risk mitigation may be associated in some way with a
payment mechanism or a financing structure.
Despite the imperfect boundaries between these four elements, the construct remains helpful
and serves as a useful framework in understanding trade and supply chain finance, since both
traditional mechanisms and emerging solutions incorporate the four core elements.
1.2.1 Payment Facilitation
Trade finance mechanisms and techniques include a component related to the settlement of a
transaction – payment to the exporter, or to a supplier for goods provided and shipped
according to the commercial terms agreed between buyer and seller.
While payment can take place in numerous ways, from check to credit card to escrow account
or through the use of certain payment mechanisms, there are several characteristics to
payment solutions in trade finance that exporters will look for:
 Secure payment from a trusted source
 Timely payment in line with the terms agreed with the buyer
 Affordable payment solutions on a global basis
 Available in multiple currencies
Importers and exporters can agree to be paid in several ways, including the following: