Record Asset Management (RAM) has announced plans to launch a shariah-compliant deep-tier supply chain finance fund in partnership with OWI Group and Khalij Group.

RAM, a European subsidiary of UK-headquartered asset management firm Record Financial Group, says it will manage the fund with support from Islamic investment and advisory firm Khalij, also based in the UK.

OWI Group provides an institutional investment platform that is compliant with shariah law, it adds.

RAM says the project aims to bring liquidity to tiers two, three and four of global supply chains, and has set a target of US$1bn in financing. 

It adds the fund will draw upon institutional investors including development financial institutions, with distribution across Europe, Asia and the Middle East.

“We are excited about the launch of our innovative shariah-compliant deep-tier supply chain finance strategy, which not only supports real economic growth but also delivers attractive returns, aligning with our commitment to impactful and ethically sound investment solutions,” says Record chief executive Jan Hendrik Witte.

Deep-tier supply chain finance enables companies further down supply chains to benefit from a tier-one supplier’s facilities, allowing them to access working capital at more favourable rates than if they sought external financing themselves.

So far, large-scale uptake has largely been limited to domestic supply chains – notably in China – and experts have called for improvements to legal, technological and operational frameworks to help the product expand across international borders.

RAM says its strategy aims to “bridge the trade finance gap by directing much-needed liquidity to underserved borrowers with high-quality credit and attractive return profiles”.

Small and medium-sized enterprises make up more than 95% of all business worldwide, yet only 20% of lower-tier SMEs have access to formal finance, it adds.

Deep-tier supply chain finance “is an innovative financial solution which increases transparency and security across the entire value chain while offering attractive risk-adjusted returns to investors”, it says.