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Dr. Waleed Al Wohaib, CEO of ITFC, said:
"This award crowns our first year of operations and we are especially honoured since it represents international recognition of the successful application of Islamic financial principles to a deal that exemplifies the purpose of ITFC, which is to enhance the economic welfare of our member countries through trade which will in turn accelerate their economic and social development thus improving people's lives."
He went on to say, "This Murabaha Deal is a landmark achievement for our trade financing operations, not only did the funds help revive Cote d'lvoire's strategic cotton sector, a major cash crop and which provides direct and indirect income to some 3.5 million people, it helped stabilise the sector and set into motion a new process of growth."
The uniqueness of the deal lies not only in the application of Islamic financial principles to fund and manage the risks pertaining to the cotton cycle in Cote d'Ivoire, but also in the use of collateral control to ensure that funds are properly applied for the purchase and distribution of inputs as and when they needed; and to ascertain that when the cotton is harvested it is controlled so that its final sale will lead to a reimbursement of the facility.
The ITFC provided the facility to CIDT for the purchase of agricultural inputs to be distributed to local farmers on credit and the ITFC is reimbursed through the sales proceeds from the cotton ultimately exported by the borrowers.
The deal was structured on Murabaha basis with ITFC as the Mudarib (managing trustee) of funds provided by all participants. It provided funds for the working capital requirements of Compagnie Ivoirienne pour le Développement des Textiles (CIDT) and Yebe Wognon - both with networks that together reach most of Côte d'Ivoire's cotton farmers - and also provides support to local farmers by allowing prompt payment, in terms of cash purchase in lieu of credit, for the harvested seed cotton sold back to CIDT.
CIDT is majority government owned, and operates four cotton ginneries. Some 72,000 farmers depend on it as their main supplier of inputs and as their off-taker. Yebe Wognon, an umbrella organization of a number of cooperatives of cotton growers, operates two ginneries with a joint capacity of 75,000 tonnes. Both also act as exporters.
The Euromoney Deal of the Year Award is presented by Trade Finance Magazine, a Euromoney flagship publication that is the longest established global magazine concentrating exclusively on international trade, export and commodity finance. Each year around 300 of the best deals worldwide are entered for the awards and the winner is selected by a panel of trade finance journalists and independent industry experts.
Posted by Siba Sami Ammari
