JEDDAH: The Arab Bank for Economic Development in Africa (BADEA) signed a line of finance agreement with the Islamic Corporation for the Development of the Private Sector (ICD), a member of the Islamic Development Bank Group, at the ICD headquarters here on Sunday.

The agreement envisages BADEA allocating $10 million “approved amount” for ICD to finance private sector companies in its African member countries and beneficiaries of the bank assisted sub-projects.

The memorandum on the line of financing, between the two corporations, was signed by ICD CEO and General Manager Khaled Al-Aboodi and Dr. Abdel Aziz Khelef, director general of BADEA.

Al-Aboodi said, after the signing, that ICD will approve financing to eligible sub-projects according to the conditions and criteria adopted by both parties as shown in the agreement. ICD will prepare a report on the sub-projects to be financed, their costs, and their modes of financing.

Eligible companies are private sector firms in ICD African member countries and the modes of financing include Murabaha between the bank and ICD, provided that the financing between ICD and the investors is in any other Islamic mode such as Ijara, installment sale or Murabaha.

As for the mechanism of financing, ICD, as an agent of the bank, purchases the materials or assets. Once owning the materials or assets, the bank sells them to ICD at the cost price plus a mark up. ICD in turn sells the assets to the client as per the agreement and following the mode agreed upon by the parties.

About security, the bank will take ICD’s risks (guarantee). ICD will seek collateral from its clients in accordance with ICD’s policies.

The bank will open an operational account containing the financing amount in addition to a sub-account for the operations earnings.