JEDDAH, 25 February 2007 — The International Islamic Trade Finance Corporation (ITFC) of the Islamic Development Bank (IDB) was launched here yesterday to promote trade relations among the 57-member Organization of the Islamic Conference. It was launched during a meeting of IDB governors.
The meeting also discussed IDB’s Poverty Reduction Fund (PRF). Saudi Arabia was the first country to announce its contribution of $1 billion to PRF at the IDB’s board meeting in Kuwait in May 2006, becoming the largest contributor to PRF, which has so far received $1.35 billion from 21 member countries. Another major contributor is Kuwait with $300 million.
Addressing the meeting, Finance Minister Ibrahim Al-Assaf emphasized the importance of international trade in boosting economic development of any country. He noted IDB’s support to promote trade between OIC member states.
“The establishment of the International Islamic Trade Finance Corporation represents the crowning of the bank’s efforts in promoting intra-OIC trade,” the Saudi minister said.
Custodian of the Two Holy Mosques King Abdullah had earlier called for boosting trade and economic cooperation among OIC countries during an Islamic summit in Malaysia two years ago, while he was crown prince.
Al-Assaf said the ITFC, which was formed after receiving approval from IDB’s board of governors, would finance trade between member countries. He said the new corporation would be able to increase intra-OIC trade from the current 14 percent to 20 percent by 2015.
He emphasized the need for encouraging trade between Islamic countries by removing all barriers and introducing new tools to finance trade operations.
Al-Assaf disclosed that 55 members including 47 countries and eight financial organizations have already signed the document for setting up the corporation. He reiterated Saudi Arabia’s support for all joint Islamic activities and projects.
“I also take this opportunity to affirm Saudi Arabia’s continuous support for IDB,” he said, hoping that the remaining member countries would soon endorse the agreement on ITFC. The ITFC has an initial capital of $3 billion.
IDB President Ahmed Mohammed Ali said: “The IDB in its capacity as an international Islamic financial institution is committed to exerting every conceivable effort and mustering all its energies and capacities to combat poverty. What has increased the IDB’s determination to intensify its efforts in this field is the resolution of the recent Islamic Summit establishing the PRF as well as the recommendation of the 10-Year Plan of the OIC and the IDB Vision 1440H which was established by the bank last year and which emphasizes the great importance that should be given to combat poverty in Islamic countries and communities.”
He added: “The total concessional financing by the IDB since its inception has amounted to $4.2 billion, nearly half of which has been utilized in financing projects that contribute to the alleviation of poverty.”
Ali said: “What is saddening is that poverty levels have increased in some least developed member countries during recent years. This is a matter which requires the bank to allocate more financial resources to meet their requirements. The current resources of the bank allow the allocation of $350 million annually, at a time when the conditions of the least developed countries require the bank to provide concessional financing amounting to $1 billion annually. The IDB will exert maximum efforts to provide financing on the best terms and conditions possible, while adopting the best ways for preserving the sustainability of the fund’s resources.”
The IDB president said with regard to utilization of the resources of the fund, the bank would give first priority to those projects and programs that satisfied the basic needs of the poor in member countries. Ekmeleddin Ihsanoglu, secretary-general of the OIC, in describing the economic fundamentals of the OIC member states, said: “The OIC countries as a group accounted for only 5.6 percent of the world GDP in 2005, while Muslims amount to 22 percent of the world population. Moreover, out of the world’s 50 least developed countries, 22 are OIC member states and 18 are in Africa.” He added: “The picture becomes bleaker when the external debt element is added and we see that 15 OIC countries are classified as among the most heavily indebted poor countries.”