The Islamic Development Bank (IsDB) and its trade finance offshoot are set to commence the second stage of a US$2.3bn coronavirus support package to boost exports in 57 member countries.  

After disbursing some US$250mn in health-related assistance last year during the first step of its coronavirus support strategy, the bank says it has signed an agreement with the Islamic Trade Finance Corporation (ITFC) to begin a second stage, focused on trade.  

The latest phase, which the bank dubs the “restore track”, will focus on measures over the medium term to finance trade and SMEs, protect “strategic” value chains and keep afloat necessary supplies for the healthcare sector and essential commodities.   

The pandemic triggered a sharp contraction in global trade during 2020, according to the World Trade Organization (WTO), as containment measures throttled consumption.   

Although the decline in volumes was less severe than expected, the pace of recovery during 2021 is “increasingly uncertain”- according to the WTO’s latest trade barometer. 

The ITFC approved financing of US$60mn during 2020 to “support procurement of essential goods”, ITFC chief executive Hani Salem Sonbol says. 

“Today, this agreement marks the confidence that IsDB has for ITFC to continue with its mandate to help member countries overcome and recover from the impact of the pandemic on their economies by providing trade finance solutions to private sector entities, financial institutions and government agencies to help in advancing their trade and improve their lives,” Sonbol says.  

The ITFC did not respond to questions from GTR on how long the second stage will last and how much is expected to be invested. 

The ITFC, founded in 2005, has a mandate to support trade finance among IsDB members, which are chiefly the countries comprising the Organisation of Islamic Cooperation.  

Among the pandemic-related assistance given by the ITFC  last year was a US$200mndeal with the African Export-Import Bank to help finance the export of soft commodities from Sub-Saharan Africa, in a move aimed at local farmers.   

Another €8mn deal was also signed with Senegal’s Banque Islamique du Sénégal for the bank to expand its trade finance operations in the private sector.  

The IsDB’s overall coronavirus response package began with measures targeted at the health response to the coronavirus pandemic, and the final stage will be a “restart track” focusing on economic fundamentals and stimulating the private sector.  

“Innovative solutions are necessary to shift the focus to the private sector and make global markets work for development,” says the bank’s president Banjar Hajjar. “This requires getting out of our comfort zone as we cannot rely on the public sector alone to improve our member countries’ economic outcomes.”