ITFC was established in 2008 with a mandate to enhance trade among OIC member countries by providing trade finance and trade-related technical assistance. Pursuant to this mandate, ITFC sets out to be the leading provider of trade solutions for OIC member countries’ needs.
Since establishment to date, International Islamic Trade Finance Corporation (ITFC) has achieved commendable results in both trade finance and trade development. Total approvals and disbursements reached US$40.2bn and US$31.01bn respectively. Total funds mobilised from partner banks and financial institutions reached US$24.4bn, reflecting ITFC’s critical role as a catalyst to attract funding for large-ticket trade transactions for the benefit of member countries.
Furthermore, ITFC has implemented a number of trade development engagements related to flagship trade promotion, trade facilitation and capacity-building projects that have contributed to improve the member countries’ business environment and their readiness to face global trade challenges. During the last 10 years, ITFC has expanded its partnerships with international, regional, and national institutions to design and deliver trade solutions and programmes to meet the needs of member countries. ITFC has also supported MCs in their efforts to promote and enhance their exportable products through various events.
Creating market impact
In 2017, ITFC continued to enhance its development impact by demonstrating noticeable achievements in moving away from a transaction-based model of trade support to a programme-based approach, where trade finance operations are integrated with trade development and capacity building in order to multiply the development impact. In addition, the corporation has continued to deliver on its commitments and maintain its solidarity with member countries since inception by focusing on sectors that are key to economic and social development, particularly energy and agriculture. In this respect, ITFC has extended substantial trade financing facilities to support these two critical sectors in member countries, with amounts reaching US$3.8bn and US$439mn, respectively.
Considering the role of the private sector, particularly SMEs, in the development of member countries, in 2017 ITFC put forward significant efforts to support the sector by providing the Two-Step Murabaha Financing (2SMF) and lines of financing to banks for the amount of US$664mn.
“With respect to the private sector, we are using innovative trade solutions such as structured trade finance (STF) tailored for corporates, in addition to lines of financing given to banks for onward financing of trade operations of SMEs. STF enables private sector participants to overcome obstacles associated with access to trade finance, boost private sector activities and contribute to the economic growth and improved socio-economic condition of people in member countries,” says Eng. Hani Salem Sonbol, CEO ITFC.
Contributing to intra-OIC trade
ITFC was established in response to calls for the increase and acceleration of intra-OIC trade, driven by a market-oriented corporation operating within the IsDB Group. As such, in the last 10 years, ITFC has been successfully contributing to the increase and expansion of trade within the OIC member countries. For instance, in 2017, 88% of ITFC’s trade financing operations specifically focused on facilitating trade between OIC member countries, thus contributing to their socio-economic well-being, as well as advancing trade and improving lives.
Sustaining access to energy
Access to energy is a key driver of economic and social development. Therefore, improving access to energy is crucial to unlocking the potential for faster economic and social development. In this context, ITFC considers supporting the energy sector as one of the main pillars of its strategy in its interventions in member countries. As such, ITFC remains a steadfast partner for providing financing to secure fuel supplies in order to maintain stability for electricity generation and reaching large numbers of the disadvantaged populations.
“In many member countries where not many financiers are willing to fund large energy projects, ITFC’s support plays a crucial role in which it mobilises resources from international markets to fund these large-ticket syndicated energy deals. Over the years, ITFC has gained substantial experience in this sector to become one of the few institutions specialised in oil and petroleum products with a global presence spanning 57 countries,” says the ITFC CEO.
Agriculture and food security
ITFC’s interventions in agriculture continue to cover commodities that helped the ember countries create jobs, improve productivity, alleviate poverty and bolster food security. Although agriculture financing is primarily for cash crops, it nonetheless helps boost food security as farmers use part of the agricultural inputs funded by the financing to grow food crops. Also, the funding allows farmers to receive timely payments for their crops, thereby enhancing their household income.
In 2017, overall approvals for the agriculture sector reached 9% of the portfolio, which received the third-largest allocation after the energy sector and SMEs.
Access to finance for SMEs
“We believe that the SME segment is one of the major components of the real economy in member countries, particularly as SMEs play a crucial role in job creation and revenue generation,” Eng. Sonbol adds.
Given the obstacles faced by them to access financing and given the challenges faced by the corporation to reach SMEs directly (due to a lack of proximity, the cost of credit due diligence and processing, monitoring, etc), ITFC endeavors to provide trade solutions to SMEs through partnerships with local financial institutions by extending lines of financing. As such, partnering with financial institutions for SME development has been identified as one of the cornerstones of ITFC’s 10-year strategy.
In order to reach a larger number of SMEs in member countries, ITFC provides Murabaha financing to local financial institutions which, in turn, extend the financing to SMEs and private sector clients. This not only contributes to creating access to finance, but it also helps promote Islamic banking as partner banks are introduced to Islamic financing instruments.
Enhancing development impact
In 2017, ITFC reshaped its trade and business development to serve the vision to become “the leading provider of trade solutions for OIC member countries’ needs”, by providing the full range of activities and programmes.
“ITFC’s trade development objectives aim to enhance OIC intra-trade co-operation, promote trade development across different sectors, and contribute to the achievement of its strategic objectives by enabling innovation in business development, such as programmes and technical assistance, and implementing trade integrated solutions, flagship programmes and Trade Related Technical Assistance (TRTA) initiatives,” says Nasser M Al-Thekair, GM of Trade & Business Development, ITFC.