Improving the SMEs Access to Trade Finance DRAFT
in the OIC Member States
70
In 1433H, the financing to LDMCs increased from US$1,495 million in1432H to about
US$2,264 million.
Source: ITFC Progress Report on Enhancing Intra-OIC Trade, 2013
Asia and the CIS Member States have received the majority of support from ITFC in terms of
trade finance, with 64.6% of the total approvals in 2011, followed by the MENA region with
29.0% and Sub-Saharan Africa at 6.4%.
ITFC has included in its plans, initiatives aimed at supporting strategic sectors, such as cotton
trade, that impact the economies of numerous OIC Member States. Relatedly and as part of a
broader capacity development and support program ITFC is also looking at competency
development among SMEs through advisory support and the establishment of centres of
expertise, including a trade centre in Africa to assist in the development of country level
competencies, and SME-level skills in trade and trade finance.
3.3. Trade Finance Today in OIC Member States
OIC Member States share a commercial demographic that is heavily weighted towards SME
and micro-enterprises, and by extension, also share a common challenge in seeking to facilitate
access to trade finance for their SME constituents – a reality that applies equally in the context
of conventional trade finance as it does in relation to Islamic Trade Finance.
The market for Islamic Trade Finance has been estimated to range from about $540 billion to
$1.5 trillion annually, based on an extrapolation of the proportion of Islamic Finance relative to
conventional finance. That is, with Islamic Finance representing between 1-3% of global
conventional finance, the same proportion is taken, to estimate the potential size of the Islamic
Trade Finance market relative to the size of conventional trade finance globally (al Baraka
Bank, 2011).
A stark finding is reflected in the analysis of access to finance, including Islamic Trade Finance,
in a recent analysis by a specialist from the Islamic Research and Training Institute, this
despite the observation in the same analysis that SMEs contribute over 65% of employment
and about 55% of GDP to the economies of Member States.
The findings of this study show- that despite of the recent growth of the Islamic
institutions and the development of new Islamic financing products, still there is no
favorable environment for Islamic finance to play vital role in the development of SMEs
in the IDB member countries. The main reasons might be due to the weakness in the
development of trade and the Islamic financing infrastructures.
Source: The Challenges of Islamic Trade Finance in Promoting SMEs in IDB Member
Countries, 2013
Interestingly, the paper argues that IDB Member States and their SMEs have been impacted by
the global crisis, and that the relative resilience of Islamic financial institutions in the face of
the crisis “put more burdens on the shoulders of Islamic financial institutions in and outside
the borders of the IDB member countries to support the growing demand for the emerging
financial system.” At the same time, this analysis suggests that Islamic Trade Finance “becomes