JEDDAH: International Islamic Trade Finance Corporation (ITFC) is scheduled to sign deals on Thursday exceeding $1 billion to support strategic commodities for a number of its member countries, CEO of ITFC Hani Salem Sonbol told Arab News.
The deals target the socioeconomic and trade development of these countries.
“The ITFC work is very diverse,” Sonbol told Arab News in an exclusive interview on the sidelines of the 42nd Islamic Development Bank (IDB) annual meeting that concludes Thursday. “We cover all aspects. Because we came to believe that financing alone will not help member countries.”
The Jeddah-based ITFC, which is an autonomous entity within the IDB, has 57 member countries from Suriname in South America to Indonesia in Southeast Asia.
The total IDB group trade financing since inception is $60 billion, out of which the ITFC contributed $36 billion to the member countries.
The main sectors that the ITFC supports are the energy and the agricultural sector. Each country is supported according to its need.
“We customize solutions,” Sonbol said, adding “We don’t have one size fits all.”
The business model adopted by the ITFC is to respond to the changing needs of member countries and the new challenges facing them. The model entails blending trade finance and trade development aspects.
“We don’t have shelf products, except for direct financing, ‘Murabaha’ financing, which is a cost-plus-profit arrangement in Islamic finance,” he said, adding that each country needs a program designed to fit its specific needs.
Two-thirds of the supported member countries are in Africa. Earlier this week, the ITFC signed a three-year $450 million framework agreement with the government of Burkina Faso, which Sonbol described as “one of the major clients.”
The agreement aims to enhance the country’s ability to export agricultural commodities such as cotton and also import its needs from the basic strategic commodities like crude oil and refined petroleum products as well as agricultural input.
The largest portion of the ITFC’s portfolio is to enhance the energy sector in the member countries; at almost 60 percent. This includes green energy, Sonbol said.
“What is new now is the ITFC is aware of the changes that new types of energy actually exist and that’s why we also try to innovate our products and programs to support renewable energy, green finance, and all these environment-friendly products,” he said.
There are new items on the ITFC agenda today. Digitization is one of them. Renewable energy, climate change, which is directly linked to trade finance, is another. Food security and an important sector that the ITFC is supporting, which is the agricultural sector, are also on the agenda.
Other programs are related to capacity building, promotional trade, and business-to-business (B2B) contracts. “Recently we had a very important B2B between African cotton producers and Bangladeshi cotton importers. We try to facilitate trade through our programs, build capacities in member countries,” Sonbol said.
As there is a regional move toward diversifying the economy to adjust to the recent oil crises, there is a move to invest in the SMEs industry.
The ITFC is designing new programs for SMEs to help meet challenges in areas like access to finance and capacity building.
“They need knowledge and advice so we support with advisory services,” Sonbol said, adding that the ITFC is currently working with the Saudi Ministry of Commerce to develop the SME sector in the Kingdom.
Boosting SMEs is among the goals in the Saudi Vision 2030 and they are described as being “among the most important agents of economic growth; they create jobs, support innovation and boost exports,” the Saudi Vision states.
Sonbol said that this program could be replicated in other countries in the future.
“We have been supporting SMEs in the private sector in general and we have achieved almost $10 billion of financing to this important sector.”
He added that the sector plays a major role in the diversification of the economy, similarly in Morocco, Tunisia or Pakistan.
ITFC to sign $1bn agreements to boost trade development in member states
ITFC to sign $1bn agreements to boost trade development in member states
