ICIEC, the insurance arm of the Islamic Development Bank, has issued a documentary credit insurance policy (DCIP) to the Arab Petroleum Investments Corporation (Apicorp).
The agreement will see Apicorp, a multilateral development bank owned by the 10 member nations of the Organisation of Arab Petroleum Exporting Countries (Oapec), gain insurance for the letters of credit (LC) it issues.
Zishan Iqbal Mohammad, an ICIEC spokesperson, tells GTR that “we are expecting an expected turnover of US$200mn which may be increased or decreased; hence it’s not a binding and static figure, but a tentative amount”.
Given that all the transactions Apicorp is involved in are in the energy sector, the ticket size tends to be high. “It’s always challenging to cater for higher volumes with existing capabilities,” says Mohammad. “DCIP would help Apicorp to extend its LC confirmation, thus facilitating trade not only in the Middle East, but would also help Arab countries to extend oil-flows to North Africa, Africa and Asia.”
In order for a transaction to qualify for DCIP coverage, a minimum of 30% of the added-value in the products transacted must come from ICIEC member states.
Apicorp’s CEO Ahmad Bin Hamad Al-Nuaimi says that the DCIP will allow the bank to expand its trade finance business throughout the region and further afield.
He continues: “Trade finance forms an important focus of our diversification strategy and contributes significantly to our mandate to support Arab energy industry development. The DCIP will help us reliably protect and control risks in trade finance transactions, which in turn will help us better support the trading needs of Arab energy companies and enhance our trade-finance business growth.”
The deal marks the first occasion on which ICIEC has signed a comprehensive, blanket coverage policy with another multilateral Arab financial institution.