Improving the SMEs Access to Trade Finance DRAFT
in the OIC Member States
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The risk profile of markets in Africa, including several OIC Member States, has been and
remains such as to have very direct impact on both the availability and cost of trade finance,
and of related risk mitigation options.
ATI was created to fill a market gap in trade and investment risk mitigation in Africa.
In the late 90's, risk mitigation tools for credit and political insurance were not
available for many African countries, and where the cover existed, it was very costly.
In addition, the relatively small volumes of trade and investments into these
countries did not justify the establishment of national export credit agencies. The
only viable solution was to form a multilateral agency that would provide more cost-
effective use of underwriting capital, reduced over-head costs and the ability to
encourage private sector insurers to assume risk in Africa.
Source: African Trade Insurance Agency
It is clear that the movement of goods and the movement of money are interrelated, and in
some markets, critically so: logistics challenges create an imperative for adequate risk
mitigation and financing, though often, such challenges arise in markets where financing and
risk mitigation are simply not available, or are available only at significant cost.
The creation of the African Trade Insurance Agency represents a collaborative solution to a
multi-country challenge, supported by an appropriately mandated IFI. The ATI model is meant
to grow in membership to include non-African participants, and therein may lie a proposition
for OIC Member States: the development of institutions or solutions that initially target a high-
need subset of OIC Member States, while ultimately seeking to grow and become more
inclusive across OIC States.
As with other jurisdictions, the role of relationships in trade is very important across OIC
Member States, so much so, that trade finance continues to be available in some of the most
challenged markets in the OIC family despite the fact that standard risk assessments would
preclude such availability. One senior banker noted that his institution is explicitly targeting
growth in “difficult” markets in the MENA Region in particular, despite the pullout of leading
financial institutions, and that the success of this effort so far, comes down to an intimate
knowledge of the markets, and important and trusted local relationship that can provide
insight, support and other forms of assistance critical to the viability of the conduct of business
in those markets.
Looking at total MT 700 messages [Documentary Letter of Credit] sent in 2012 in the top 15
importing countries, the largest in descending order were: China, South Korea, Bangladesh,
Hong Kong, and India. Also, the highest annual growth in import traffic came from Bangladesh
(+42%), Indonesia (+11%) and the United Arab Emirates (+6%). The steepest declines in
import traffic were France (-8%), Algeria (-7%), Taiwan (-6%) and Japan (-6%).