Gatehouse Bank, the UK-based Islamic bank, and Islamic market intermediary company DDCAP are set to launch a fully shariah-compliant structured trade finance fund in early 2010.
The goal of the new fund will be to invest capital in structured trade finance transactions in order to inject new flows of capital into the global marketplace.
As a result of the credit crisis, many western banks operating in this sector are restricted in their trade finance activities. The creation of an Islamic fund to service this sector would have worldwide benefits, says a statement issued by the two institutions, as it would provide liquidity to a market that has been seriously constrained.
The structured trade finance fund is deliberately designed as a clear-cut and accessible approach to financing, facilitating the natural flow of business and kick-starting credit flow in the real economy. Global in outlook, the fund will be weighted towards the organisation of Islamic conference economies.
Commenting on the launch of the fund, Richard Thomas, CEO, Gatehouse Bank, comments: “Given the liquidity challenges that many banks are experiencing, the shariah-compliant structured trade finance fund has been launched at a time that will help alleviate the lack of capital available for transactions.
“This back-to-basics approach will have benefits for international trade and will continue to do so as the economic situation improves. The Islamic finance model promotes accessible, low-risk investments whilst achieving good returns, benefiting every stakeholder. We are firmly of the belief that it is both good business and totally in accordance with the principles of shariah to encourage the real economy through international trade.”
The new fund provides an attractive alternative to traditional asset classes, having no direct correlation to equity markets or macro-economic cycles. Instead, it is very much focused on commodities. It is to be an open-ended, Cayman domiciled fund supporting the activities of the traditional trade finance banks and other trade finance funds, as well as originating its own business.
By bringing an Islamic solution and operating with Islamic financing structures, the transactional risks will be further reduced and an exemplary template for providing funds to support trade and commerce in the future will be created. The fund structure is such that it is an ideal way for the Islamic Investors to enter into this market.
Stella Cox, managing director, DDCAP, adds: “The shariah-compliant structured trade finance fund provides an uncomplicated, ideal way to become a major player in the trade and commodity finance sector, with a wide range of available transaction types. Combined with Gatehouse Bank, we have the right expertise and experience to manage this fund and, using the principles of Islamic finance, it will experience low levels of volatility and drive attractive, stable returns for participants.”
The launch of the fund comes as Gatehouse Bank continues to prove Islamic finance as a more accessible and widely used method of finance internationally. Gatehouse Bank recently transacted the first cross border trade on the Bursa Suq Al-Sila’ commodity trading platform, an end-to-end shariah-compliant commodity trading platform facilitating commodity-based Islamic financing under shariah principles.
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