Arab Trade Finance Program - Role in Providing Liquidity for Arab Banks

There's an article in Kuwait Times in which Dr. Jassim Al Mannai, Chairman and CEO, of ATFP is quoted as stating that banks particularly in the UAE were borrowing from the ATFP to supplement their liquidity and take advantage of the lower cost.  A rate of Libor with a small margin to cover administrative costs was cited without apparently too much detail.  Dr. Al Mannai is also  Director General (Chairman of the Board) of the Arab Monetary Fund.

A bit of context.

Eligibility Criteria

ATFP loans are tied to the financing of Arab trade.  Like similar government programs, there are national content requirements (minimum 40% Arab) and mandated tenors.  Money cannot be borrowed to fund, say, a wise investment in Austin Martin.

Financial Capacity

How much financing can ATFP provide?  Let's turn to their 2008 financials (the last issued).

1. At 31 December 2008, ATFP had total assets of approximately US$772 million funded almost exclusively by equity of US$769 million.  
   
2. Total loans were only US$416 million (2007: US$485 million).
3. Turning to Note 5, in 2008 there were new drawdowns of  US$774 million in loans (2007:  US$729 million) against repayments of US$844 million (2007: US$683 million). 

Even at 100% of shareholders' funds, this amount is unlikely to be significant on a macro level, though it might be significant for an individual institution.

That being said, the program is a worthy initiative particularly in supporting interArab trade.