The Islamic Development Bank (IsDB) is extending US$150mn in direct trade finance lending to 12 countries in Africa struggling with food insecurity.
The International Islamic Trade Finance Corporation (ITFC) and the Islamic Solidarity Fund for Development (ISFD), both members of the multilateral development bank, will provide direct sovereign lines of credit to the governments “in the wake of the pandemic and the rising food security challenges to help strengthen their resilience”, they say in a joint statement.
The programme is designed to help the recipients reduce the overall cost of financing imports of food and medicine.
Less developed countries have been disproportionately hit by soaring prices of some staple commodities following the world economy’s emergence from the Covid-19 pandemic and Russia’s invasion of Ukraine almost a year ago, which disrupted the supply of wheat, corn and sunflower oil.
Benin, Burkina Faso, The Gambia, Mali, Senegal, Sierra Leone, Togo, Chad, Comoros, Djibouti, Mauritania, and Uganda – all Organisation of Islamic Cooperation members – will be the initial beneficiaries of the programme.
“The signing of this Mudaraba [profit-sharing] agreement comes at a perfect time to provide our least-developed member countries with the support they need to mitigate the effects of Covid-19 and the food security crises,” says IsDB president and group chairman Muhammad Al Jasser.
While the Organisation of Islamic Cooperation has around 21 members classified as least developed, the programme will focus on those where the IsDB has a significant presence.
The ITFC is putting in US$40mn of funding while the ISFD is contributing another US$10mn, GTR understands.
Because the transactions will have a duration of between 12 to 18 months the funds will be ploughed back into the programme, bringing the estimated value over five years to US$150mn.
ISFD director-general Hiba Ahmed says: “This program presents an innovative approach in addressing one important dimension of the multidimensional aspects of poverty which is the requirement to strengthen the economic resilience of our member countries through the empowerment of youth, women, and MSMEs.”
In October last year the International Finance Corporation also launched an effort to help countries weather food security challenges, announcing a US$6bn facility for companies along the food value chain, in partnership with commercial lenders.