ISLAMIC TRADE FINANCE & TRADE PROMOTION PROVIDER
SOMETHING ABOUT US SERVING MEMBER AND NON-MEMBER COUNTRIES ITFC became operational in January, 2008 with the purpose of advancing trade to improve the economic condition and livelihood of people across the world As a leader in Shari ’ ah-compliant trade finance, ITFC deploys its expertise and funds to businesses and governments in its member countries. Our primary focus is to encourage and act as a catalyst for intra-trade among OIC Member Countries 1
OUR VISION “ ITFC is the leading provider of trade solutions for OIC member countries' needs ” 2
OUR MISSION “ ITFC is a catalyst for trade development among OIC member countries and beyond ” 3
WHERE WE OPERATE 4
OUR CORE COMPETENCIES RICH HERITAGE TECHNICAL EXPERTISE GEOGRAPHIC PRESENCE Over 30 years of experience in Originator, Structurer & 56 member countries in 4 trade finance/promotion & Arranger, Implementer continents cooperation SOLUTIONS FOR IMPACT AAA RATING PREFERRED CREDITOR STATUS Structured Trade Finance 57 member countries Member of IDB Group SMEs/LDMCs: Facilitation, Capacity Building, and Promotion 5
TRADE APPROVALS BY REGION MENA Sub-Saharan Africa Asia/CIS (US$ billion) 7,000 6.05 5.16 Total approvals in 6,000 5.05 9% 2016 are US$4.48 4.47 5,000 4% 4.48 8% billion down 4% 36% 27% 17% 3.03 4,000 26% 44% 2.17 2.5 2.55 Since inception in 2008, 6% 3,000 35% 9% 6% ITFC ’ s cumulative funded 7% 24% 2,000 33% financing reached to 39.5% 24% 67.5% 53% 69% US$35 billion 47% 48% 1,000 64.5% 60% 68% 51% - In 2016, total number of 2008 2009 2014 2010 2011 2012 2013 2015 2016 operations = 58
1437H-2016 TRADE ACTIVITIES IN NUMBERS 11% 21% 1% Bank Guaranteed Other Credit Insured 12% 2% Structured Minerals and Chemicals 60% 65% Crude and Sovereign Petroleum 12% Products Food & Agriculture 11% Unsecured Approvals by Sector – (1437H- 2016) Approvals by Instrument – (1437H-2016) 9
FINANCING MECHANISMS 1. Direct Financing: Financing is extended 3. Two-Step Murabaha: ITFC provides directly from ITFC through a Murabaha Two-Step Murabaha Financing to local Agreement between ITFC and the Financial Institutions or commercial Beneficiary banks to be extended to SMEs ITFC may also participate in 2. Line of Financing: ITFC provides lines of 4. Co-Financing & Syndication: In this syndications financing to local Financial Institutions mode of financing, ITFC, acting as a arranged by which act as Intermediary (Lines Mudarib (lead arranger or co-arranger), other Agents) between ITFC and the end invites one or more Financial institutions beneficiaries for the Trade Finance Institutions to participate in the Operations upon signing a Line Master financing Agreement 10
ITFC PORTFOLIO IN TURKEY - Turkey has been one of the largest recipients of the IDB Group as well as ITFC ’ s trade financing facilities (Total financing reached USD 6.68 billion). - Throughout 2008-2017, ITFC has approved 75 financing operations for a total amount of USD 3.9 billion in Turkey. - ITFC has been very active in Turkey especially during the last 3 years in terms of trade finance approval size (2.07 billion) thanks to the openning of IDBG Istanbul Office. 9
ITFC PORTFOLIO IN TURKEY - ITFC has a diversified portfolio in Turkey through local banks- mainly the Participation Banks, Turk Exim Bank and Investment Banks- for line of financing made available for the benefit of SME size Turkish exporters and importers. - On the other hand large corporates are benefiting from direct lines especially under the structured trade finance facilities which provide tailor made solutions for the import or pre export financing needs. - In order to reach SMEs in these different sectors, ITFC will increase its financing through local banks. The development impact is expected to be enhanced through these bank lines. 9
ITFC PORTFOLIO IN TURKEY ITFC Approvals in Turkey (usd million) 900 810 800 640 700 620 600 500 415 400 312 300 204 200 124 125 102 100 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 9
ITFC PORTFOLIO IN TURKEY ITFC Turkey 2008-2017 ($3,9b) LG, 343, 9% Clean, 240, 6% STF, 737, 19% 2SMF, 2581, 66% 9
1- DIRECT FINANCING (1) A Murabaha financing agreement is (2) Shipment signed between ITFC and the beneficiary. - Other parties may co-sign the agreement Beneficiary (2) The supplier ships the goods to the beneficiary. (3) ITFC makes payment of purchase price directly to the Supplier. (4) ITFC sells the goods to the beneficiary (3) Payment of (5) Repayment of Sale (5) The beneficiary repays the sale price Purchase Price Price at Maturity directly to ITFC. ITFC takes the direct credit risk of the beneficiary. 11
2- 2 STEP MURABAHA FINANCING (1) A Line of Financing agreement is signed between ITFC and the local Bank (5) Payment of Purchase Price (2) Local Bank requests Sub-Murabaha Agreements to be signed between ITFC and the (4) Advise of Shipment beneficiary (6) 1 st Sale (3) Shipment (7) 2 nd Sale (3) Local bank provides bank guarantee for the beneficiary (8a) Repayment of 1 st Sale Price (8b) Repayment of 2 nd Sale Price (4) Payment under the financing is disbursed at Maturity at Maturity directly by ITFC Beneficiary (5) The beneficiary repays the sale price directly (1) 1 st Murabaha Agreement (2) 2 nd Murabaha Agreement to ITFC ITFC takes the risk of the local bank Local Bank takes the credit risk of the beneficiary 12
3- CO-FINANCING & SYNDICATION (3) Shipment (2) Murabaha Agreement Beneficiary (6) Sale of (7) Repayment Shipment of Sale Price at Maturity (5) Payment of Purchase Price (4) Payment of (8a) (8c) (8b) Purchase Price (8) Repayment (4a) (4b) of Sale Price (4c) (1) Mudaraba Agreement 13
4-LINE OF FINANCING (1) A Line Agreement is first concluded between ITFC (as Fund Provider) and a Financial Institution (as Guarantor of underlying Murabaha Transactions). (2) Subsequent Murabaha Agreements are then concluded between ITFC and End Beneficiaries (SMEs). (5) Payment of (3) Bank Guarantees are issued by the Financial Institution in favor of (3) purchase price Issuance of ITFC covering the risk of End Beneficiaries. (1) Line of bank financing guarantee (4) The Supplier ships the goods directly to the End Beneficiaries. agreement (4) Shipment (5) ITFC shall make the payment of Purchase Price directly to the Supplier. (2)Murabaha Agreement (6) ITFC will then sell the goods to the End Beneficiaries on Murabaha basis (Sale Price). (6) Sale of Goods (7) At maturity, the End Beneficiaries shall pay the Sale Price to ITFC. In case of non-payment, the Financial Institution shall cover the (7) Payment of sale price at maturity unpaid amounts. Beneficiary 14
WHAT IS STRUCTURED TRADE FINANCE • Alternative → to conventional payment guarantee (Gov ’ t/Bank/Corp) • Innovative Asset Backed financing → More Secure • Source of Repayment → Transaction Cash Flow ( Self-Liquidating Transaction) • Transferring Credit Default Risk → Performance Risk (Collateral, Market Risk, Documentation & Business Operational Risk) 15
STRUCTURED TRADE FINANCE Warehouse 1. Client pays DEPOSIT (Security Margin) 4. WR 7 Goods shipped and docs. are presented 2. Collateral 6. Release 3. ITFC pays the supplier for the Goods Manager Order Beneficiary Goods delivered to Warehouse, CM issues WR to 4. ITFC 1. Security 2. 5. Client pays for delivery of portion of the shipment Margin 6. ITFC sends release instruction to CM 3. 100% Payment 7. Client takes delivery of the Goods Documents presented 5. Payment 16
STF BENEFITS CUSTOMER BENEFITS ITFC BENEFITS • • Improves Liquidity Cycle Financing Accessibility to Farmers → Development Mandate • Financing Accessibility to Farmers • Transforming Credit Risk into Performance Risk → • Increasing Export Size → Hard Currency Higher Limits • • Beneficiary ’ s Off-Balance Sheet → Better Financial Asset Backed Transaction → Risk Mitigated Position Structure • • Customized Solutions Self Liquidating Transaction • Accessing Difficult Markets • STF is a Perfect Match for Islamic Finance (Murabaha) 17
THANK YOU
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