The International Islamic Trade Finance Corporation (ITFC) says it has struck its first sovereign deal in Uzbekistan in a bid to boost the country’s agricultural exports.
As part of the murabaha deal, the ITFC will lend US$50mn to the Uzbekistan Fund for State Support of Agriculture, which will in turn provide finance to cotton and wheat farmers to purchase fertiliser and petroleum products.
The deal is being run as a pilot project, and the ITFC says that if both parties deem it a success it will look to invest further in Uzbek agriculture, injecting funds into the fruit and vegetable industries too.
These financing plans come on the back of a US$500mn framework agreement struck between the ITFC and the Republic of Uzebkistan in January, which aims to build co-operation between the pair, partly through providing pre-export financing for agricultural products and produce.
Speaking to GTR, ITFC relationship manager Anvar Nigmatov says the farmers, who will be free to choose their fertiliser supplier, typically buy these chemicals from local sources but import one type from Russia and Kazakhstan.
He adds: “The cotton will be transferred to yarn, fabric or garment before they are exported. The export destinations are CIS [Commonwealth of Independent States] mainly, with some going to China, the US and Canada.” Uzbekistan is one of the biggest producers of cotton in the world, with the sector generating more than US$1bn in annual revenue.
However, the industry has been plagued by persistent accusations of forced labour, with the Uzbek-German Forum for Human Rights (UGF) and the Global Legal Action Network (GLAN), a team of human rights lawyers, reporting that people are still being forced into the fields, despite President Shavkat Mirziyoyev saying the practice would be stopped.
Nigmatov says: “The government has been implementing reforms recently, which are having a positive impact in the sector. Despite the improvements, many challenges are yet to be overcome at local level. With the help of organisations such as the ITFC, the government is working on bringing reforms to state financing of the agricultural sector and to make state financing more transparent.”
Since it was founded in 2008 the ITFC has provided more than US$45bn of trade financing to the 56 member states of the Organisation of Islamic Cooperation (OIC), which counts all five Central Asian republics as members.
In April ITFC signed a three-year framework agreement worth US$150mn with the Kyrgyz Republic, which included funding for strategic commodities, while also contemplating capacity-building programmes, with the objective of enhancing free trade and co-operation between the OIC and the Kyrgyz Republic.