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Murabaha Trade Finance Deals Flourish at IsDB Annual Meetings in Egypt as ITFC Pens Several Agreements Totalling US$7bn

Amidst the rhetoric of aspiration and the jamboree of the unveiling of several announcements relating to issues dealing with post-COVID economic recovery and global shocks, climate action and sustainability, trade finance probably featured most prominently at the 47th Annual Meetings of the Islamic Development Bank (IsDB) Group in Sharm El Sheikh, Egypt between 1-4 June 2022.

The IsDB Group lead on trade finance, The International Islamic Trade Finance Corporation (ITFC), for instance signed twelve “Landmark (Financing) Agreements for Cooperation with the Public and Private Sectors” worth US$12 billion – four with various Egyptian government ministries as well as eight agreements with African and Asian countries and entities. These include Cameroon, Senegal, Uzbekistan, Burkina Faso, Mauritania and the African Export and Import Bank (Afreximbank).

The largest was the US$6 billion agreement signed by Eng. Hani Salem Sonbol, CEO, ITFC, and Dr. Rania Al-Mashat, Egyptian Minister of International Cooperation, in the presence of Egyptian Prime Minister Dr. Mustafa Madbouly, to renew a five-year framework agreement.  The renewal is an extension of the Framework Agreement signed in 2018 to meet Egypt’s food and energy needs.

The ITFC also signed Agreements with the Egyptian Ministries of Trade and Industry, Planning and Economic Development, and the Egyptian Exporters Association (Expolink) to finance the establishment of the Export Academy under the aegis of the second phase of the Aid for Trade Initiative for Arab States (AfTIAS).

ITFC is also participating with Afreximbank and The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) in cooperation with the Egyptian Government to support the Arab Africa Trade Bridges Programme (AATB) Programme to expand Egyptian exports to SSA markets and to benefit from the African Continental Free Trade Agreement (AfCFTA).  Another agreement signed was with the Egyptian Ministry of Public Business Sector to boost the exports of Egyptian SMEs by establishing a framework for cooperation to increase trade between Egypt and Africa through cooperation between Jusoor, the specialist trade promotion company of the Ministry, and the AATB Programme.

The letter of intent identifies areas of cooperation to support trade finance and trade development and the provision of advisory services to Jusoor which aims to promote bilateral trade between Egypt and Sub-Saharan African (SSA) countries in various sectors such as cotton, as well as logistics, financial and insurance services for exporters and importers.

ITFC also signed a €115 million Murabaha financing facility with Senegal to support the purchase of refined petroleum products to strengthen the energy sector in Senegal. 

The Corporation also signed two agreements with Uzbekistan. The first was a US$100 million Murabaha Agreement to support the trade finance needs of women entrepreneurs and the private sector in Uzbekistan. The second was a US$24 million Murabaha financing facility with Orient Finans Bank in Uzbekistan to support the trade finance needs of the bank’s private sector and SME customers, as well as to promote women’s entrepreneurship in the central Asian country.

Under the agreement, ITFC will provide US$24 million in two separate segments, half of which will be allocated to meet the growing demand for Sharia’a compliant trade financing between the private sector and clients of the bank’s SMEs.  The other half will be allocated to meet the financing needs of Sharia’a compliant trade for women in business. 

The ITFC also extended an €8 million line of the financing to Afriland First Bank in Cameroon to support the needs of the Bank’s clients to obtain financing for financed and unfunded trade across key sectors such as energy and agribusiness.

Perhaps the most important agreement signed was with Afreximbank, the multilateral African trade finance entity, whereby ITFC is mandated to raise a US$250 million syndicated Murabaha financing facility that will support Afreximbank’s trade finance programme established to address the effects of the Ukrainian crisis on Africa (UKAFPA).  

Under the agreement, the Corporation will strengthen the Bank’s ability to help its customers in participating member countries purchase goods, particularly commodities that are experiencing a surge in food price inflation in the global market.

Afreximbank’s UKAFPA program is designed to alleviate the economic challenges resulting from the conflict that led to a global food crisis following the devastating pandemic, coinciding with the world starting to emerge from the pandemic.  ITFC’s support actions will also promote South-South trade, deepening economic relations between Africa and Arab countries.

Another major agreement is a 1-Year €238 million Murabaha financing facility signed with the Government of Burkina Faso to finance the import and export of strategic goods especially energy products, food commodities and cotton. 

The ITFC also extended a US$50 million Murabaha financing facility to the Ministry of Finance of Mauritania for the purchase of commodities and products, with SOMELEC being the executing agency.

In a separate development, ITFC has also renewed a Murabaha Trade Financing agreement for US$175 million to support the import of essential commodities with the State Trading Organization (STO) in Maldives. The financing facility will support the procurement of essential commodities, including petroleum products, staple food and medicine and medical equipment.

ITFC is also involved in two initiatives to support access to global markets for SMEs in IsDB Member States. The first is the Trade Development Fund (TDFD), capitalised at US$50 million in collaboration with Abdullah Al-Subaie Charity Foundation. The TDFD organizes training programmes for international marketing and export strategy in collaboration with the Foreign Trade Training Center (FTTC) to support trade development projects in OIC member states and Islamic communities in non-member countries.

The TDFD is a Waqf (Endowment) fund, whose primary objective is to build and provide financial resources from charitable sources for the design and implementation of initiatives, activities and programmes related to the promotion and development of trade for Member States and Muslim communities in non-member States.

The Fund invests its endowment resources in miscellaneous assets that distribute its net revenues equitably (50% – 50%). 50% of the returns are added to the capital and the remainder is disbursed for the purpose of designing and developing business projects dedicated to promote trade. This operational model, says ITFC, gives the Fund a strong momentum for growth, which will lead to a sustainable platform for financing charitable trade development activities.

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