DRAFT Improving the SMEs Access to Trade Finance
in the OIC Member States
85
From a resource and financial cost perspective, there may be some incremental overlap and
some degree of duplication of effort, but a well-planned strategy and project/task plan will
include effective management of such considerations.
Recommendation 2: Consider SME access to trade finance with reference to
conventional and Islamic Finance, broader trade facilitation activity and related
COMCEC workstreams.
The significant promise and potential of Islamic Finance and Islamic Trade Finance have been
clearly demonstrated, and the expected evolution of intra-OIC trade flows increase the
probability of robust demand for Islamic Trade Finance options and solutions in the medium
term, however, industry specialists clearly perceive the need for further maturation in Islamic
Finance capabilities across OIC Member States and beyond.
Conventional trade finance must remain a part of the capabilities supporting intra-OIC trade
flows and between OIC Member States and other trading partners. Conventional trade finance
is evolving to include supply chain financing solutions and to new solutions like the SWIFT/ICC
Bank Payment Obligation. At the same time, Islamic Trade Finance is developing more effective
risk mitigation capabilities in line with international practice and is wrestling with challenges
around consistency of interpretation and the risk of non-conformity with Shari’ah
requirements.
In similar fashion, trade finance and its availability to SMEs must be assessed and developed
with appropriate reference to other trade facilitation initiatives, such as “single window”
access to new markets and their infrastructure, or initiatives around transport and logistics
infrastructure development. OIC Member States like Indonesia, the UAE and others are taking
significant measures in such areas, and it will be important to the extraction of maximum value
from any trade finance initiatives, to consider such broader activities when looking at trade
and supply chain finance.
It is increasingly a form of “Best Practice” in international and economic development, to
consider financing, including SME access to liquidity, in the broader context of trade
facilitation efforts. OIC Member States requiring priority focus on trade facilitation as part of
their development approach will extract additional value from facilitation programs when a
financing and liquidity dimension is included in such programs.
COMCEC initiatives around financial sector and capital markets evolution also merit careful
scrutiny and consideration as stakeholders consider solutions and opportunities aimed at
enabling SME access to trade finance. As with the preceding recommendation, this one is a
matter of process and approach – ensuring appropriate consideration with and leveraging of
concurrent priorities and initiatives.
The benefits of seeing SME access to trade finance within several high-influence contextual
realities are primarily that appropriate levels of financing will be enabled through better
alignment of regulatory regimes, capital markets models and financial sector reform, including
evolution of both conventional and Islamic forms of finance and trade finance.