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I D BSLAMIC EVELOPMENT ANK
Trade Fınancıng Programs
Together We Build a Better Future
11TH AFRICAN OIL AND GAS, TRADE AND FINANCE CONFERENCE &
EXHIBITION
23 -25 May 2007
NOT AN OFFICIAL UNCTAD RECORD
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Islamic Development BankTogether We Build a Better Future
A. INTRODUCTION ON IDBA. INTRODUCTION ON IDB
B. TRADE FINANCING PROGRAMS B. TRADE FINANCING PROGRAMS
• IDB TRADE FINANCING IDB TRADE FINANCING
OPERATIONSOPERATIONS• BADEA EXPORT FINANCING BADEA EXPORT FINANCING
SCHEMESCHEME
C . ITFC : NEW TRADE FINANCE C . ITFC : NEW TRADE FINANCE
ENTITYENTITY
IDB Experience in oil & gas trade financing in AfricaIDB Experience in oil & gas trade financing in Africa
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Established in 1975
56 members countries
Authorized capital ID 15 billion (US$20.54 billion)
Subscribed Capital ID8.1 billion (US$11.10 billion)
Shareholders fund ID4.62 billion (US$5.78 billion)
ISLAMIC DEVELOPMENT BANKTogether We Build A Better Future
A. INTRODUCTION
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ISLAMIC DEVELOPMENT BANK
56 MEMBER COUNTRIES
Africa Middle East, Asia (including Central Asia) Europe (Albania) and South America (Suriname)
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Islamic Development BankTogether We Build a Better Future
Trade Finance & Promotion DepartmentTrade Finance & Promotion Department
MilestonesMilestones
1977
1987
1994
1995
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Islamic Development BankTogether We Build a Better Future
Trade Finance & Promotion DepartmentTrade Finance & Promotion Department
MilestonesMilestones
2005
IDB BOG Establishe
d
ITFC
1999
1998
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Islamic Development BankTogether We Build a Better Future
SALIENT FEATURES OF IDB TRADE FINANCING
Essentially deferred credits.
Maturity depends on type of goods and type of financing product : Usually a maximum 12 months roll over facilities
PROFIT MARGIN Based on the relevant currency LIBOR for the relevant period plus a spread. Spread reflects risks elements “Mark to market”
IDB, being an MDB, normally charges some basis points below market rates.
FUNDING Ordinary Capital Resources of IDB (OCR) Funds raised under Syndication /Co-financing
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Algeria Bahrain Bangladesh Benin Burkina Faso Chad Cote D’Ivoire Egypt Indonesia Iran Jordan Lebanon Libya Kuwait
Government State Owned Companies Private Companies
Kazakhstan Malaysia Mali Morocco Mozambique Niger Pakistan Saudi Arabia Senegal Sudan Togo Tunisia Turkey UAE
COUNTRY COVERAGE CUSTOMER BASE
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GROSS APPROVALSCUMULATIVE FINANCING 1977 - 2006
$ Million
26,933.0
12,271.0
2,767.0124.0
Total TradeFinance
Oil & GasFinancing
Africa oilFinancing
BADEA oilFinancing
US$ Million
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1654.5
727
1808.0
726
2260.0
995
1341.2
725
2527.0
1539
2002 2003 2004 2005 2006
Import Trade Financing
US$ Million
US$ Million
IMPORT TRADE FINANCING BY YEAR
Islamic Development BankTogether We Build a Better Future
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GROSS APPROVALS
$ Million
727.0
84
726.0
79.45
995.0
110
725
175
1539
279
2002 2003 2004 2005 2006
OIL & GAS FINANCING BY YEAR
(IDB Total & Africa)US$ Million
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BADEA
$ Million 84.0
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79.0
27
110.0
15
175
75
279
74
2002 2003 2004 2005 2006
OIL & GAS FINANCING BY YEAR
Total Africa & Sub Saharan Africa US$ Million
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Islamic Development BankTogether We Build a Better Future
IMPORTANCE OF THE TRADE FINANCE TO IDBIMPORTANCE OF THE TRADE FINANCE TO IDB
IDB Strategic Framework emphasized trade as a
vehicle to improve cooperation and enhance
economic development of member countries
Trade constitutes 61% of total Bank’s operational
approvals since 1397H (1977)
Intra trade financing represents 76% of total
approvals
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Islamic Development BankTogether We Build a Better Future
BENEFITS OF THE TRADE FINANCE
Adding Value to L/Cs of MC Banks
- Use of Irrevocable Commitment to Reimburse (ICR); adding value to L/Cs of MC banks
(exporter’s bank (negotiating bank) can claim reimbursement from IDB paying (agent)
bank.
Reduction in Transactional Costs
- ICR is like L/C confirmation and mitigates against risks of non-payment by issuing
banks. Eliminates need for additional L/C confirmation of L/Cs
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Islamic Development BankTogether We Build a Better Future
BENEFITS OF THE TRADE FINANCE
Irrevocable Commitment to Reimburse (ICR)
issued to exporter’s bank at no cost
- No other charges such as commitment fees etc.
- IDB do not perform L/C issuance, advising and negotiating roles;
- Do not deprive other commercial banks of their business
- IDB not only add value to L/Cs but save transaction costs.
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Islamic Development BankTogether We Build a Better Future
BENEFITS OF THE TRADE FINANCE
Development of correspondent banking
Facilitates growth of correspondent banking in MCs.
Anchor role of ICR issuance; Agent Banks’ role as paying/reimbursing banks;
importers’ / exporters’ banks (All are MC Banks).
IDB has more banks on list of acceptable banks for guarantee and L/C issuance
Good market knowledge of IDB- Enable MC banks to leverage on IDB’s knowledge edge.
Indirectly facilitates growth of trade and investment links among MCs.
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Islamic Development BankTogether We Build a Better Future
Trade Syndications:
Leveraging on IDB present Triple A status
Successful in raising funds for trade financing; sometimes
Oversubscription in syndications for “below investment” grades MCs
Recently completed deals:
US$ 375 Mn for Bangladesh
US $ 34 Mn for Gov. of Senegal;
US $ 200 Mn for SAMIR, Morocco;
OTHER BENEFITS
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Islamic Development BankTogether We Build a Better Future
INTERNATIONAL ISLAMIC TRADE FINANCE INTERNATIONAL ISLAMIC TRADE FINANCE CORPORATION (ITFC)CORPORATION (ITFC)
ObjectivesObjectives• To promote intra trade among IDB MCsTo promote intra trade among IDB MCs• To be a catalyst for mobilization of funds for trade finance in To be a catalyst for mobilization of funds for trade finance in
MCsMCs• To complement IDB’s Group Strategic Plan on enhancing To complement IDB’s Group Strategic Plan on enhancing
economic cooperation among MCseconomic cooperation among MCs
FeaturesFeatures• IDB is the major shareholderIDB is the major shareholder • International charter with commercial orientationInternational charter with commercial orientation• Trade financing and promotion roleTrade financing and promotion role
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Approved at the 30th Annual Meeting of IDB Board of Governors (BOG) June 2005 Putrajaya, Malaysia
Capital: Authorized : US$ 3.00 billion Paid up : US$ 500 million
Establishment: 1st General Assembly held on 24th February 2007. Operations expected to start by the middle of the year.
Location: Headquarters : Jeddah, Saudi Arabia 1st Branch : Dubai, United Arab Emirates
Islamic Development BankTogether We Build a Better Future
INTERNATIONAL ISLAMIC TRADE FINANCE INTERNATIONAL ISLAMIC TRADE FINANCE CORPORATION (ITFC)CORPORATION (ITFC)
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Membership
IDB has the majority shares (59%)
26 Members of IDB ratified
8 Banks ratified
Islamic Development BankTogether We Build a Better Future
INTERNATIONAL ISLAMIC TRADE FINANCE INTERNATIONAL ISLAMIC TRADE FINANCE CORPORATION (ITFC)CORPORATION (ITFC)
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Trade Finance & Promotion DepartmentIslamic Development BankP.O. Box 5925, Jeddah 21432Kingdom of Saudi Arabia
Tel. No. : (9662) 646- 7013/14/29Fax No.: (9662) 637- 1064Website: http://www.isdb.org
CONTACTS