COMCEC Trade Outlook 2019

Trade Financing:

The COMCEC Trade Working Group also touched upon the trade financing issues in its Meetings.

In its fifth meeting held on March 26

, 2015, the TWG evaluated the present situation in the

Member Countries with respect to Export Credit Agencies (ECAs). After detailed deliberations,

the Working Group came up with the following policy recommendations in order to improve the

role of ECAs in the Member Countries

;

Member States are encouraged to examine and assess the financing needs of their

exporters

Member States are invited to enhance transactional cooperation among their ECAs

Member States are encouraged to review the soundness of their ECAs with the aim of

improving the overall performance of the ECA

Member states are called on to promote public-private dialogue within the ECA context

Member states are encouraged to initiate capacity building activities for strengthening

institutional and human capacities of their ECAs

Despite all odds, especially for SMEs, trade finance promises prospects in future. The analytical

study titled “Improving the SMEs Access to Trade Finance in the OIC Member States”

commissioned by the COMCEC Coordination Office for the 2nd Meeting of the COMCEC Trade

Working Group envisages that through appropriate policy and regulatory treatment of trade

finance, coupled with recent innovations like supply chain finance and the key role of ECAs and

IFIs in supporting access to trade finance, a far more positive view of the immediate future in

terms of SMEs access to finance and trade finance is possible. Moreover developments in Islamic

Finance and adaptation of Islamic Finance Tools would offer great opportunities for COMCEC

Countries

Furthermore, the COMCEC has initiated the Export Financing Scheme (EFS) and Islamic

Corporation for the Insurance of Investment and Export Credit (ICIEC) to contribute to financing

trade among the Member States.

The Export Financing Scheme (EFS) was first initiated by the COMCEC as the Longer-TermTrade

Financing Scheme. IDB was entrusted with the implementation of the EFS. The 10

IDB Annual

Meeting, held in March 1986 in Amman, Jordan, approved the Longer-Term Trade Financing

Scheme. The title of the Scheme was later changed to Export Financing Scheme (EFS) and it

became operational in 1988.

The EFS aims at promoting exports of non-conventional commodities by providing the

necessary short and long-term funds. The repayment periods under the Scheme were originally

between 6 and 60 months for the intra-OIC export. This period has now been extended to ten

years for capital goods, such as ships, machinery etc. Each Member State participating in the EFS

had one or more national agencies for the Scheme. The role of the national agencies was to

coordinate the promotion of the EFS in their countries. Since its inception in 1988, cumulatively

over an amount of USD 3 billion of approvals were made under the Scheme.

After the establishment of the International Islamic Trade Finance Corporation (ITFC), in 2005,

all trade financing activities of the IDB, including the EFS, were brought under the ITFC. The ITFC

commenced business at the beginning of 2008. Most commonmodes of trade financing provided

by the ITFC are murabaha, installment sale and istisna’a.

COMCEC Coordination Office, 2015a.

COMCEC Coordination Office, 2013b.