International Factoring and Shari’a Finance

Changes to the General Rules of International Factoring will now ensure that this important and growing branch of factoring is facilitated within the FCI member network, allowing support for this type of business on a fully cross border international basis.

The initiative to adapt the rules was developed following the suggestion of an FCI member, Dar Al Tawreeq. FCI’s Legal Committee together with Dar Al Tawreeq, Noor Bank (members of FCI) and International Islamic Trade Finance Corporation (ITFC), created a working group which prepared the amendments to the rules.

Peter Mulroy, Secretary General of FCI was delighted to announce the adoption of the service: “Islamic Factoring is an increasing important element in the finance of international trade and our ability to support Shari’a compliant business is particularly important for our global member base. This development is another real enhancement of the support we can provide for our members.”

An Interview with Haitham Al Refaie, CEO of Tawreeq:

We spoke to Haitham Al Refaie, CEO of Tawreeq Holdings an FCI member who developed and suggested the idea of Islamic financing being introduced into the FCI.

What is Shariah finance and why is Shari’a important?

Islamic finance or Shari’a-compliant finance is considered an alternative approach to lending that operates based on the principles of the Islamic law called Shari’a, which prohibits the payment or receipt of interest (riba). In the recent years, Islamic finance has gained global recognition as an ethical and socially responsible alternative form of finance, used by Muslims and many non-Muslims as well.

Shari’a law is key to understanding Islamic finance as it forms the underlying basis for the financial structuring and the standard models upon which the industry operates. Whilst many rules exist related to the financial structuring within the industry, it is often required, especially in equity based transactions, that the financed company be involved primarily in a Shari’a-compliant undertaking, which would prohibit things like traditional banking, insurance, pork production, and other things deemed harmful to the community.

What has the FCI implemented and how will this help it’s members?

It is indeed a great step taken by the FCI to support Shari’a-compliant factoring by including the rules in its ‘General Rules of International Factoring’, as suggested by Dar Al Tawreeq, a subsidiary of Tawreeq Holdings. As Islamic finance gains recognition and acceptance, even among conventional customers, the inclusion of Islamic factoring in FCI’s general rules will help its global members introduce Islamic finance products as a new means of funding. I believe that by having a standard framework for its members, FCI can be instrumental in the growth of Islamic factoring and in turn boost international trade.

Please can you give an overview of Tawreeq

Tawreeq Holdings is a UAE, Luxembourg and Morocco-based group, specializing in comprehensive Supply Chain Finance solutions for Small and Medium-size Enterprises (SMEs) and their government and corporate clients across the MENA region, connecting them to regional trade hubs in Africa, Asia and CIS markets. Tawreeq undertook a novel approach by introducing the world’s first comprehensive Shari’a-compliant Supply Chain Finance (SCF) solutions, innovating the way MENA does business, while offering compelling short-term Investment opportunities to both conventional and Sharia-compliant institutional investors.

Tawreeq Holdings group offers its services through separate functional arms, utilizing the flexibility to serve its clients. Our group includes Tawreeq Holdings – Africa, Dar Al Tawreeq Forfaiting and Factoring Services LLC, iSCF Capital Limited – Regulated by DFSA, Tawreeq SCF Investments, HMR Consulting and Tawreeq Global Sukuk. Tawreeq Holdings specializes in structured Shari’a-compliant Supply Chain Finance (SCF) solutions, offering businesses and investors tailored solutions. Tawreeq’s Shari’a-compliant fundamental business activities are the following:

• Factoring – An efficient alternative working capital solution that provides Suppliers / SMEs with immediate access to cash by selling their approved invoices “Accounts Receivables” offered at reasonable discounts.
• Reverse Factoring – Cash flow and liquidity solutions tailored for large and mid-sized corporates to match their receivables and payables “Payables Finance” and extend payment terms with regional and international suppliers.
• Comprehensive SCF Solutions – Tailored cash flow and working capital solutions to facilitate trading and improve payment and financial terms between corporates and their supplier network.
• Securitisation Programs – Trade receivables securitisation solutions, structured to provide corporates with financial flexibility by benefiting from reliable and revolving liquidity facility.
• Alternative Investments – Competitive, low-volatility alternative investments that are short-term, Shari’a-compliant, and focused on the real economy, which provide attractive yields.

Please tell us about Tawreeq’s technology

Tawreeq powers their working capital programs through the use of Shari’a-compliant innovative technology, expertise, and risk mitigation strategies. Tawreeq Holdings offers technology-enabled solutions through a number of automated, cloud-based online platforms. Tawreeq’s online platforms are accessible from anywhere with just a web browser, connecting suppliers, buyers and funders, and providing complete transparency into the SCF programs.

Focusing on technology and the Shari’a part, we believe that innovation is the driver for growth, and we offer different tailored solutions required for carrying out SCF programs and transactions, which in turn helps our clients meet their needs. Tawreeq’s comprehensive Shari’a-compliant SCF technology-enabled solutions include:

• Tawreeq Marketplace – a global online marketplace for the sale and funding of accounts receivables and payables, providing working capital liquidity to public and private corporates and their supplier network, while offering institutional funders access to high-quality, short-term, trade assets with competitive returns.
• InvoiSME – a receivables financing program that facilitates working capital liquidity to Small and Medium-size Enterprise (SME) suppliers through a streamlined online platform, efficiently facilitating access to finance. The InvoiSME Factoring solution enables SME suppliers dealing with large corporate Buyers to register swiftly online and gain quick and easy access to cash flow through the sale of their approved invoices.
• Tawreeq Global Sukuk (TGS) – offering an innovative, first-of-its-kind short-term investment through the issuance of Global Sukuk regulated by the Financial Services Regulatory Authority (FSRA) of ADGM. TGS offers investors exposure to an alternative investment asset class in underlying trade and SCF assets at low risk and attractive returns.