The International Islamic Trade Finance Corporation (ITFC) has launched a new sharia-compliant fund to support trade development projects in Muslim countries and communities around the world.
Having set an initial target capital of US$50mn, the new Trade Development Fund (TDFD) will seek to bolster trade initiatives in member countries of the Organisation of Islamic Cooperation (OIC) and Muslim communities in non-member countries.
Listed under Islamic law as a waqf, the fund is made up of endowed assets, the benefits of which can only be used for charitable causes.
Resources will be invested in sharia-compliant investments, with 50% of returns allocated for operational purposes and the remaining 50% going towards the principal to increase the fund.
The ITFC says the fund will utilise investment returns for grants or concessional financing linked to the “design and delivery of trade activities, raising awareness or knowledge sharing of trade-related issues and trade-related technical assistance”.
Nasser Al-Thekair, general manager for trade and business development at ITFC, tells GTR that to date the fund has raised almost 20% of its US$50mn target, with money seeded from the ITFC.
“We will be targeting other contributors to the fund, whether from other Islamic financial institutions, philanthropists or non-governmental organisations to reach a maximum fund size of US$50mn,” he adds.
He says that once the TDFD reaches this target, it may approach the board to increase the size of the fund.
According to Al-Thekair, the fund started providing funding support to countries in May, and will work to supply trade development funding to any entities, including trade promotion organisations and export-import banks, that are in a position to develop and promote Islamic trade.
With coronavirus forecasted to wreak havoc on global trade volumes this year, the fund has already helped countries reeling from the socio-economic effects of the virus import medical supplies and food items.
Earlier in July, for example, ITFC announced that it had penned an agreement as part of the TDFD which helped the Republic of Tajikistan obtain medical equipment.
According to ITFC’s 2019 annual report, it approved US$5.8bn in trade finance operations for the year, with the three sectors accounting for the majority of these approvals being energy, food and agriculture, and financial support.
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