Improving the SMEs Access to Trade Finance DRAFT
in the OIC Member States
90
It is recommended to initiate discussions about the need for an appropriate process for
attracting non-bank capital to the provision of trade finance liquidity, in order to prepare this
capability ahead of the need for it that will eventually arise. OIC Member States may opt to link
their deliberations to the current efforts by the London Group under the auspices of
Washington-based BAFT-IFSA, or might prefer to initiate direct and tailored consideration of
the needs of OIC Member States in terms of trade finance capacity. This recommendation
includes discussion and assessment of the value of non-bank capital in supporting trade flows,
and a determination about the advisability of joining ongoing discussions in the public domain,
or taking a more discreet and OIC-specific approach.
Initially, this recommendation envisions industry taking a proactive step in anticipating and
reacting to a looming shortage of trade finance capacity – on the basis that the lack of trade
finance may trigger some serious reactions in selected markets. This recommendation
envisions a coordinated effort across OIC Member States in attracting non-bank capital to the
area. The cost of engaging in industry-focused dialogue is negligible however; eventual
progress may lead to the notion that some form of trade asset distribution capability needs to
be developed, to assist in the creation and accessibility of additional liquidity and trade
finance. The development of some form or technology “hub” might imply a cost in the range of
USD $250,000 to $ 1 million plus, depending on the required complexity.
Recommendation 9: OIC Best Practices Study
The planning and conduct of an OIC-focused trade finance best practices study appears to offer
significant promise in terms of medium and long term trends and developments. While certain
instruments and practices linked to trade finance have been around for a very long time, and
some are very well understood, it is nonetheless advisable to facilitate and promote periodic
“state of the market” discussions with selected participants. An outcome of such discussions
would be to share findings and observations among OIC Member States, updating the analysis
periodically as needed.
OIC Member States should conduct a best practices analysis of the trade and supply chain
finance activities of leading banks in OIC Member States, making the findings available through
an OIC Trade Finance Knowledge Centre, and update the analysis every 2-3 years as OIC
Member States progress their capabilities at different rates.
The advantage of such analysis is in promoting alignment in bank practice, and commonality in
interpretation of relative rules and common practices, and in the updating of shared
understanding and best practices, based on the frequency with which such analysis is
conducted. An OIC-focus study of this nature might be feasible on the basis of an investment of
$50,000.