DRAFT Improving the SMEs Access to Trade Finance
in the OIC Member States
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It is possible, in combination with various trade financing mechanisms, to obtain a variety of
types of insurance to cover a range of risks. Such insurance solutions can be secured from
private sector sources, or from export credit agencies; certain guarantee schemes and
solutions can also prove invaluable in securing the interests of buyers and sellers against a
variety of risks related to international commerce. The Islamic Corporation for the Insurance
of Investments and Export Credit is one such entity.
e. Additional Considerations in Risk
The conduct of business across borders involves significantly more risk in general, than the
pursuit of commercial activity within familiar national borders.
One of the realities of risk analysis and assessment is that perception plays a significant role in
shaping expectations and conclusions about the degree of risk involved in a given transaction,
relationship or market. This is a critical element particularly for markets that are perhaps not
well known or particularly well understood beyond their immediate regional context, and
more so where such markets seek greater engagement in international commerce.
Risk perception can be shaped by numerous factors, and in trade finance, these include:
 Limited technical expertise of the risk analyst
 Limited first-hand knowledge of the market being assessed
 Lack of transparency or visibility of key indicators or data elements
At times, the opportunity to correct optics and perceptions presents itself in simple and
obvious ways that are well worth pursuing, and in other circumstances, the process can be
more complex and time-consuming, and may require a variety of complementary initiatives,
from public sector engagement and political discourse, to commercial initiatives, including
efforts to create transparency and favourable conditions for international engagement.
Risks that are clearly and objectively communicated and understood can be equitably
mitigated and managed. Absence of information and visibility tends to result in overestimation
of risk, particularly when risk assessors have limited international experience, and thus, the
pricing of risk mitigation options can be inflated unnecessarily.
Risk mitigation solutions in support of trade can be provided by banks and trade financiers,
but they are also very frequently provided by private insurers, export credit agencies (that can
be public, private or hybrid institutions) and international agencies such as the various
multilateral development banks.
1.2.3. Information Provision
Trade finance is increasingly facilitated and enabled through sophisticated technology,
whether through bank systems or other platforms.
Importers and exporters have sought increasingly high levels of visibility – on a near real-time
basis – about the financial flows related to their trade transactions, as well as the physical
movement of the goods involved. Treasury and finance professionals within importing and