Improving the SMEs Access to Trade Finance DRAFT
in the OIC Member States
80
 Absence of capacity management through syndications and other forms of risk-
sharing, or development of additional capacity
It must be noted in terms of product innovation however, that the various support and
enabling institutions around trade and trade finance are increasingly looking to leverage and
promote the use of leading techniques, certainly in the context of conventional trade finance,
with bankers and trading companies showing increased interest in supply chain finance
mechanisms, despite a long-standing preference among MENA Region countries and parts of
sub-Saharan Africa, for traditional mechanisms like documentary letters of credit.
Figure 27: IDB Trade Finance Operations
Source: Connecting to Global Value Chains, IDB 2013
While the trade finance operations conducted by ITFC, ICIEC and other key institutions
engaged in trade support is clearly on a growth trajectory, these institutions are required to
exercise appropriate caution in their lending and financing activity, and do operate in a
resource-constrained environment. The growth and development of Islamic Finance is integral
to the related growth of Islamic Trade Finance, and both require adequate levels of liquidity
and balance sheet (or funding) capacity to be able to respond to gaps in financing, and to be
able to adequately support projected growth rates in trade, including intra-OIC trade flows.
One means of assuring adequate levels of capacity, is to attract additional non-bank and non-
IFI capital to support the conduct of trade. This issue of capacity has been discussed in the
context of the global state of the trade finance market, and exists to some degree today in the
context of OIC Member States. The development of trade finance funds, and the attraction of
non-bank investors and capital pools (including sovereign wealth funds) to the trade finance
asset class, is fundamental to the global sustainability of trade and supply chain finance
activity, and will become increasingly central to considerations around trade and supply chain
finance in OIC Member States.