Trade a priority for the Middle East and North Africa region

Banks and forfaiters in Middle Eastern and North African countries are affected by the global financial crisis but trade finance offers scope for doing new business.

Lack of liquidity and a collapse in stock market prices are taking their toll. However financing trade using traditional instruments such as letters of credit, stand-bys and avalised promissory notes is providing a means for banks to do business in challenging times.

“Banks and investors are looking to link with the real economy,” explains Wassila Hamdi Ben Amor of Tunis International Bank and chair of ITFA’s North Africa and Middle East Regional Committee.

“They are more interested in import and export transactions than working capital deals or in buying equities at the moment,” she continues. “The rationale is that it is better to be a lender in a trade-related deal than an owner of a business. At least if there is a default on a trade deal and it is properly structured it is likely to be possible to reschedule the debt. With an equity you will just lose money.”

The attraction of trade related transactions tends to be limited to short-term maturities at the moment. Moreover North African risks such as those arising from Algeria, Morocco and Tunisia tend to be viewed more favourably than those originating in the Gulf or elsewhere in the Middle East. Nonetheless Ms. Ben Amor is upbeat about the outlook for forfaiting in the region as whole.

“We have received expressions of interest from several banks in the Gulf in hosting education seminars for example. There is a readiness to embrace the forfaiting product and to examine how it may be relevant to their institutions and to their clients. We are hopeful,” she says, “That we will be able to organise such events in the course of the year as banks become more active in using trade finance as a means to do business, to assist their clients and to become active again after the crisis.”