The first soft commodities pledge hosted on the DMCC’s Tradeflow platform has generated huge additional interest in the platform, says Paul Boots, Tradeflow’s director.

In March the platform, which offers a centralised registry of commodities ownership in the UAE, hosted a US$1.5mn trade financing agreement between Eurofin Asia – an asset manager – and Safir Neinava – a Dubai-based commodity trader.

Boots tells GTR: “The fact that we’ve now announced the soft commodities pledge has created interest from soft commodity traders and financial institutions. The trend we’re seeing here is the emergence of Africa and there’s a lot of soft commodities coming from there. A lot of those are coming to Dubai and are being redistributed to the other markets.

“We’ve now opened the platform up. It was always designed to deal with a wide variety of commodities. Whatever the commodity we’ve been able to handle it. The fact that we have now been able to publicise this shows the breadth of the platform. It will help other institutions becoming comfortable doing the same thing.”

Furthermore, the involvement of Eurofin Asia marks the first time a foreign financier without a UAE base has participated in a transaction on Tradeflow since it was known as the Dubai Commodities Receipt, pre-2006. This too has helped generate further interest in the product, says Boots.

He explains: “Since announcing this we’ve had interest from banks we were already speaking to and new banks that also have customers in the region, wondering how they can service them. The risk and legal departments may have not been comfortable financing stock located in the UAE before. Now we’re getting those kinds of phone calls.”

The pledge will see Eurofin provide Safir Neinava with up to US$1.5mn through Tradeflow. The trader will use powdered milk as collateral, which will be stored at Integrated National Logistics (INL) in Dubai – a DMCC-rated warehouse.
It takes the number of transactions supported by the platform through the 100 mark.

Eurofin’s head of merchant finance says: “Despite having no physical presence in the UAE, DMCC Tradeflow platform’s strong legal and technological framework and warehouse rating programme provides us with the required confidence to issue inventory financing to its members. The market outlook for this type of trade finance is positive and we look forward to signing similar agreements in the near future.”