SPECIAL FEATURE
T rade finance is the lifeblood of global commerce as it provides essential financial services and instruments such as credit and guarantees. Financial institutions, including multilateral development banks, are a critical facilitator of trade, with around 40 percent of goods traded worldwide supported by bank-intermediated trade finance. However, despite this critical role of trade finance, merely providing trade finance products is not enough to promote healthy, e ffi cient and sustainable trade value chains. An entire trade ecosystem is needed to contribute to lasting economic growth and stability. This involves not just financial support, but also robust policies, targeted assistance to micro, small and medium-sized enterprises (MSMEs), and the building of physical infrastructure as well as institutional and human capacity. In 2022, the Asian Development Bank (ADB) reported that the global trade finance gap had surged to a record US$2.5 trillion, up from US$1.7 trillion in 2020. This describes the mismatch between the much higher demand for trade finance and the much smaller available supply. In developing economies, large corporates and multinationals have access to trade finance, but for small businesses funding is a challenge, for example due to lack of collateral and credit history. A study by the International Finance Corporation (IFC) and the World Trade Organization (WTO) in 2023 noted that in regions like West Africa and the Mekong in East Asia less than 20 percent of trade was supported by trade finance compared to 60-80 percent in advanced economies. “We are currently facing a polycrisis with numerous global challenges. This began during the COVID-19 pandemic, which caused a severe hit to global trade and was exacerbated more recently by geopolitical events and rising interest rates and inflation. We are witnessing a trend away from globalization while dealing with increasingly complex regulations and the retrenchment of global banks,” says Khalid Khadduri, Director, Business Development, Private Sector at the OPEC Fund. These challenges are making it harder for financing to be available where it is needed most.
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The OPEC Fund is also supporting the
development of trade infrastructure, including ports and critical roads for international shipping. The OPEC Fund has financed several ports from Togo in West Africa to Pakistan in South Asia that support transportation and logistics, helping to reduce trade barriers and costs.
In 2024, the OPEC Fund and City Bank PLC signed a US$30 million
loan agreement to support international trade by providing financing to import and export companies in Bangladesh, especially in the agriculture and green energy sectors.
In 2022, the OPEC Fund provided US$50 million to an ITFC syndicated trade finance facility of US$100 million to improve food security in Uzbekistan by
supporting the import of wheat and other critical agricultural products.
The OPEC Fund launched its trade finance operations in 2006 and has since provided over 11,000 unfunded guarantees globally for over US$12 billion, benefiting partners and issuing banks. The OPEC Fund’s operations cover various financial solutions, including import and export financing, structured commodity finance and unfunded risk-sharing programs.
“We operate across all our product range to support the trade ecosystems in our partner countries. This includes
working directly with financial institutions, providing lines to
facilitate trade, supporting small and medium-sized enterprises and directly partnering with corporates,” Khadduri explains.
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