Line of Trade Financing
Line of Trade Financing
The Line of Trade Financing is designed to ultimately benefit private sector participants, including SMEs, through extending financing to Banks / FIs for the financing of their clients.
Banks / FIs act as Intermediary (Agent) between ITFC and the end beneficiaries, whereby ITFC signs Murabaha Agreement with end beneficiary against a Guarantee from the Bank / FI.
How the Solution Works
01
Initially a Line of Trade Finance Agreement between ITFC and the Bank is signed.
02
The Bank acts as an agent of ITFC and signs the Murabaha Agreement on behalf of ITFC with end beneficiary
03
When Murabaha Agreement is signed, the Bank’s role as an Agent with regard to that Agreement ends.
04
Once the role of the Agent ends, the Bank issues a bank guarantee against non-payment by client for each respective Murabaha agreement (prior to disbursement) covering the full amount of financing (cost + mark-up) and in a standard format provided by ITFC.
05
Goods are shipped to the client.
06
ITFC (through the Bank’s facilitation) pays the supplier of goods/services under the Murabaha agreement upon receipt of disbursement request.
07
The end beneficiary (client) repays ITFC upon maturity or in instalments.
08
After full amount is repaid by the end beneficiary (client), ITFC releases the Guarantee.
