Client: Common Fund For Commodities
Country: Global
Year:2006
The Common Fund for Commodities (CFC) is an autonomous intergovernmental financial institution established in 1989 under the framework of the United Nations Conference on Trade and Development (UNCTAD). The CFC was established with an aim to improve market structures in international trade on commodities in order to increase their export earnings. The fundamental remit of the CFC has been to ‘mitigate vulnerabilities of commodity producers largely caused by price volatility’.The CFC provides loans and grants to non-profit organisations for projects supervised by International Commodity Bodies.
The loan portfolio of the CFC was under performing. The mid term review of the Five Year Action Plan (FYAP) noted that in the period 1998-mid 2005 US$ 19.1 million had been committed in loans but only US$0.6 million disbursed. A number of factors had contributed to the poor disbursement of the loans, notably the administrative complexity of disbursing loans in more than one country and the high transaction costs for the CFC. A number of projects contained both a grant and loan element- some projects continued without the loan element.
Services provided
Triple Line reviewed loan instruments used in less developed countries by aid donors and the private sector, and presented some initial ideas and concepts for the CFC to consider.
This included a review of the effectiveness and efficiency of CFC’s loan portfolio of $12mn and a comprehensive analysis of alternative loan instruments.
In particular, the review set out the principle of a loan guarantee scheme which could be developed in partnership with other financial intermediaries. A strategic paper was presented to the CFC Board which included:
- Description of loan/credit instruments in the market for developing countries;
- Assessment of effectiveness and efficiency of CFC loan instruments, and
- Design of credit guarantee instrument.
Achievements
- CFC learned from the analysis and recommendations from Triple Line and the loan portfolio increased from under $0.6mn in 2004-5 to $9.1mn in 2007-9.
- Triple Line’s report contributed to the learning on credit guarantee instruments and other financial instruments.