Factoring and receivables finance association FCI will work with the International Islamic Trade Finance Corporation to form a new Islamic Factoring Chapter within the FCI network.
Netherlands-based FCI is an umbrella organisation for independent factoring companies that counts more than 400 members worldwide and provides them a network for cooperation in cross-border factoring.
The agreement with Saudi Arabia-based ITFC, a member of the Islamic Development Bank Group, will support the growth of small- and medium-sized enterprises (SMEs) in their domestic and international trade under Islamic factoring rules, FCI said in a statement on Monday.
“The Islamic Factoring Chapter is an attempt to create focus and develop a centre of excellence with best practices for the Islamic factoring sector,” FCI Secretary General Peter Mulroy said.
The new Chapter will introduce factoring to Islamic banks and non-bank financial institutions and develop their understanding of pursuing factoring as a line of business to actively promote trade between member states of the Organisation of Islamic Cooperation (OIC) and beyond, said FCI.
“The idea is to bring a time tested practice of traditional factoring, an open account trade finance solution to Islamic finance, so they too have solutions to provide their clients, all in a Shariah-compliant manner.”
ITFC will work with FCI to develop the legal, regulatory and commercial aspects of Islamic factoring.
ITFC is an associate member of FCI. The new Chapter is a result of the organisation’s contribution to the development of the Supplementary Agreement on Islamic Factoring along with UAE-based Noor Bank and Tawreeq Holding, which was approved in June 2018.
FCI and ITFC see opportunities for factoring in Islamic countries as the world trade volumes of OIC countries reach $3.2 trillion, representing 9.4 percent of world trade, they said citing the Islamic Centre for Development of Trade.
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