Islamic Development Bank sets up $1bn trade finance fund

TRADE FUND: The IDB has signed an agreement with the newly-formed ITFC. (Getty Images)

The Islamic Development Bank (IDB) has signed a Mudaraba agreement with a newly-formed Islamic trade finance institution to manage a $1 billion fund.

IDB will be providing the funds to boost trade in Organisation for Islamic Conference (OIC) member countries, whilst the Jeddah-based International Islamic Trade Finance Corporation (ITFC) will be the fund manager (mudarab), it said in a statement on Monday.

"'IFTC has been formed to take over all the trade business formerly undertaken by various windows in the IDB Group," said Ahmed Mohamed Ali, IDB chairman, about the institution which was formed in 2006 by the OIC.

"[This will lead to] consolidating all of the bank's trade finance activities under a single umbrella, eliminating overlap and improving service delivery."

TFC's role is to develop sharia-compliant trade financing instruments and products, in order to stimulate investment opportunities and the flow of trade between OIC member countries.

Waleed Al Wohaib, chief executive of ITFC, said that the institution's greater autonomy would allow it to meet market expectations more effectively.

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