EBI Publications

Major Challenges Two major factors constitute a major challenge to the outlook of trade finance, they are considered to be: a. The arising financial crisis around the globe, that lead to the deleveraging of European banks resulting in decreased credit in the market. b. Stringent regulatory norms set in Basel III. However, the strong fundamentals of the MENA banks are believed to address these challenges and to boost the global and regional trade via facilitating trade through a variety of trade finance instruments. Islamic Trade Finance Islamic Trade finance tools are differentiated from the conventional trade finance products in that they prohibit interest rates (free of interests). Some of the these products are; Wakalah; is a letter of credit based on the principle of Wakalah, where fixed fees and commissions, rather than interest, are paid to the bank for acting as an agent on behalf of the client. Murabahah; is the most widely used Islamic trade finance product, in which the bank imports the goods, issues the letter of credit and sells the product on the basis of mubarabha. The selling price includes marginal profit for the bank. Musharakah; is an agreement which involves partnership between the bank and the client regarding the sale and purchase of the goods. Consequently the profits and the costs are divided between the parties according to a previously agreed contract between them.

RkJQdWJsaXNoZXIy NTU2OTQw