Thursday , 22 February 2018

The OPEC Fund for International Development (OFID)

Vienna, Austria

As a result of an OPEC conference in Algiers in 1975, the OPEC Fund for International Development (OFID) was established in 1976. Member countries are all OPEC members except for Ecuador and Angola, i.e. Algeria, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. Like OPEC itself, OFID is based in Vienna, Austria where it employs approximately 160 people. OFID has no field offices.

OFID’s main objective is South-South development cooperation to provide assistance to the poorest countries in the world, based on ground-level partnerships. The founding agreement excludes members of OFID from receiving OFID aid.

OFID and the OPEC Secretariat are two institutions with different functions. OFID’s main concern is the reinforcement of financial cooperation between its member countries and developing countries, whereas the OPEC Secretariat’s principal aim is to coordinate the petroleum policies of its members. While OFID’s Ministerial Council comprises the ministers of finance of its member countries, OPEC’s supreme authority, the Conference, consists of the ministers of energy.

OFID’s priority areas are energy, agriculture, transportation, finance (trade, capital markets, MSME funding), multi-sectoral community-based development, water, sanitation, health, and education.

As of the end of 2013, approximately 76% of OFID’s cumulative public sector support has gone to finance initiatives to resolve the food-water-energy nexus. OFID channelled about $2 billion of its public sector lending in support of water supply and sanitation, agriculture, and rural development.

In June 2012, the Ministerial Council of OFID announced the ‘Ministerial Declaration on Energy Poverty’, stating that OFID would make $1 billion available to bolster its Energy for the Poor Initiative (EPI). OFID thereby aims to confront energy poverty – which it calls the missing “Ninth MDG” – by helping to meet the global goal of universal energy access by 2030. Within this context, OFID focuses on the delivery of innovative, small-scale energy solutions, primarily to off-grid, rural communities, facilitates access to reliable and environmentally-sound power in the South by establishing new, and improving existing utility companies, and by helping countries to tap into their renewable energy sources. For this purpose, OFID also provides direct support to private sector energy poverty reduction projects under its separate Private Sector Facility. Activities include the construction of new facilities and the rehabilitation and upgrade of older inefficient facilities in Jordan, Kenya, Jamaica, and Pakistan.

At the global level, OFID has a €6.5 million equity participation in the Energy Access Fund. The Fund will invest in small enterprises involved in power generation systems (e.g. solar home systems), micro-generation infrastructure (hydro, solar, wind, biomass), “energy kiosks” (electricity generation point with centralised energy consumption by businesses), fleet of batteries, or any other activity linked to expanding access to electricity for rural and sub-urban populations in Africa and developing countries in Asia.

OFID also provides assistance to the education sector, including funding towards the construction, modernisation and expansion of schools, colleges and universities; the provision of technical and vocational training; and strengthening of national education systems. This support is supplemented through OFID’s grant programmes, which assist small-scale, grassroots schemes and knowledge transfer through the sponsorship of conferences and workshops, among many other activities. OFID also runs a scholarship programme for graduate students from developing countries.

Since inception and until November 2014, OFID committed approximately €14 billion; of which €9.3 billion have been disbursed. 132 countries worldwide have benefited from OFID’s financial assistance.

The majority of OFID’s funds are given in the form of loans, directly demanded by developing countries. Only about 5% (approximately €410 million) of OFID’s budget is given in form of grants. Grants were committed for technical assistance (approximately €130 million), a special grant account for Palestine (approximately €90 million), a special programme on HIV/AIDS (approximately €69 million), humanitarian aid, and support for research. Given that OFID has no field staff, it often disburses aid through international and local organisations which are capable of timely and effective implementation on the ground.

Grants amount to roughly €20 to €25 million per year. Per organisation and project, grants vary between €80,000 and €1.6 million. OFID prefers not to fund personnel, but claims to be flexible regarding the calculation of positions to limit overhead costs. and