Barak Fund Management and Bahraini investment bank Ibdar Bank have partnered to launch a fund that will invest in sharia-compliant transactions.
Under the name Barak Ibdar Shariah Trade Finance Fund, the fund will be based on the same strategy as Barak’s current flagship Structured Trade Finance Fund, which offers short-term, asset-backed alternative credit lending in Sub-Saharan Africa.
The new fund, however, will be mandated to invest in sharia-compliant trade, namely activity that is consistent with the principles of Islamic law.
Ibdar Bank, which operates under a wholesale Islamic banking licence and is regulated by the Central Bank of Bahrain, will be acting as the fund’s placement agent within the GCC region, specifically Bahrain, the United Arab Emirates, Saudi Arabia and Kuwait. The bank will also provide the fund with initial capital of US$10mn.
Barak Fund Management writes on its website that it has decided to go ahead with the new fund “after some consideration over the past few years”.
“The demand for sharia-compliant investment vehicles has been growing globally over the past decade or so, as has the appetite for the alternative asset class of trade finance,” the company writes. “With the fund focusing on Africa, which the Middle Eastern investor base knows particularly well, coupled with it being a US dollar-denominated fund, the opportunity for rapid growth of the fund is certainly something Barak is excited about.”
Ibdar Bank expects investor inflows of US$100mn within the first 12 months of the fund’s launching.
The bank’s acting CEO Ahmed Al-Rayes says: “We have launched this fund, a parallel sharia fund of the Barak Trade Finance Fund, which since its inception in 2009 has had an average of 13% return to investors per year, in response to our clients request for a liquid investment product with high returns.”
Other institutions in the Gulf region are also looking to launch initiatives focusing on sharia-compliant finance and trade. Last month, the Dubai Islamic Economy Development Centre said it was advancing discussions with the UAE’s central bank to establish the first sharia-compliant trade bank.