The export credit agency launched by the Jeddah-based Islamic Development Bank (IDB) is to begin operations on 21 July with the aim of increasing trade between Muslim countries. The Islamic Corporation for the Insurance of Investment & Export Credit (ICIEC) has authorised capital of Islamic dinars (ID)100 million ($145 million), and is initially aimed at providing short-term export cover (MEED 9:9:94).
The agency has been established as a subsidiary of IDB, and the Islamic bank has subscribed to 50 per cent of the agency’s capital, all of which is paid up. The remaining capital has been raised from 30 Muslim states, all members of the Organisation of the Islamic Conference. On 1 July, subscribed capital of the ICIEC was ID 65.6 million ($95 million), of which ID 57 million ($83 million) was paid up.
States which have completed the membership process for the organisation, are Bangladesh, Egypt, Indonesia, Jordan, Kuwait, Malaysia, Mali, Pakistan, Saudi Arabia and Tunisia.
‘The corporation will provide only export credit insurance during its early years of operation and will offer investment insurance at a suitable juncture in the future,’ a report issued by ICIEC says. The insurance programmes on offer are: comprehensive short-term policy will include cover for commodities and light manufactured goods where credits do not exceed two years; supplemental medium-term policy will cover exports, of mainly durable goods, which have credits of between two-five years; and bank master policy which is aimed at covering non-payment risks of financing operations by the IDB or other Islamic banks. All the company’s operations will be guided by Sharia (Islamic law).
Several of the countries subscribing to the new corporation already operate their own export credit agencies, including Malaysia, Indonesia, Tunisia and Egypt. ‘Our service is supposed to be complementary,’ says ICIEC’s senior underwriter, Ahmad Zubair Hashim. ‘We are not planning to compete with national export credit agencies.’
The only existing multilateral export credit agency is the Kuwait-based Inter-Arab Investment Guarantee Corporation. However, there are plans for additional regional agencies, including a GCC export credit agency (MEED 14:7:95).