Improving the SMEs Access to Trade Finance DRAFT
in the OIC Member States
30
 Advisory support
While the specific characteristics of various programs may differ, the overarching objectives of
these programs is to assist beneficiary economies in engaging more effectively in international
trade, by ensuring adequate supply of trade finance support for the importers and exporters
seeking to pursue international commerce. Additionally, the banks and financial institutions of
beneficiary economies may not be very experienced in trade financing; in order to assure
adequate and sustainable levels of local support, IFI programs will include elements aimed at
developing the technical competence of local trade bankers.
Perhaps equally importantly, the reputations of local financial institutions may not be
particularly well established in international markets, and as such, international trade banks
may not be sufficiently comfortable with these local institutions, to trust the trade finance
instruments issued by local banks in developing markets. In such cases, IFI specialists will
conduct appropriate due diligence on local financial institutions, and will offer to guarantee the
obligations and undertakings of these banks, as one way of mitigating the concerns of
international institutions in dealing with the local banks.
The World Bank/IFC’s Global Trade Finance Program has been in operation for nearly a
decade, and was established with a fairly broad mandate and potential scope of operations:
The GTFP aims to help increase the availability of trade finance in underserved
markets. In November 2004, the Board of Directors approved IFC’s proposed $500
million GTFP. The goal of the program was to “support the extension of trade finance to
underserved clients globally.” The new model sought to address a range of weaknesses
in IFC’s past trade finance efforts. To encourage the flow of trade finance, IFC would
guarantee the payment obligation of a local bank in a developing country to an
international confirming bank. The program was intended to allow IFC to respond
quickly to support liquidity when and where it was needed, assist local banks develop
relationships with international counterparts, and enhance trade finance capabilities
among local banks.
Source: World Bank Independent Evaluation Group: IFC GTFP Evaluation, 2013
Every major IFI has developed and deployed some form of trade finance program, and several
provide metrics related to their financing activities and default/loss experience which, as
shown below, amounts to zero losses over a period of nearly fifteen years, despite the fact that
these programs deliberately target the highest risk markets in the world.