Hani Salem Sonbol, CEO of the International Islamic Trade Finance Corporation, explains the new directions his organisation is taking in the light of the global upheaval caused by the Covid-19 pandemic. Interview by Laurent Soucaille.
Very early on, the International Islamic Trade Finance Corporation (ITFC) provided immediate assistance to its member countries affected by the Covid-19 crisis. Does this imply new priorities for you?
As the pandemic unfolded, ITFC was able to react quickly to help member countries respond to the public health emergencies and socio-economic impact of the crisis. ITFC provided support to our countries and clients, enabling them to meet their immediate needs during the spread of the virus and to build resilience to external shocks in the longer term. We disbursed nearly $495m in trade finance to support our clients and help them alleviate the health crisis, restore trade supply chains, provide affordable and quality food products and retain jobs in small, medium, and micro enterprises.
ITFC adopted a blended approach, combining trade finance lines, technical assistance, and capacity building programmes, which allowed us to maximise the impact on clients affected by the crisis.
The Covid-19 pandemic has deeply affected and influenced the achievement of the Sustainable Development Goals (SDGs). What started as a health crisis has created an unprecedented economic shock, with global growth depreciating by 3.1% alongside a loss of about 255m full-time jobs. Now, we all must adapt to the new realities.
ITFC’s five-year strategy has been refined to better manage economic disruptions. Now more than ever, we need to foster a strong, inclusive, and sustainable recovery in line with the SDGs.
How do you finance trade in the Middle East and North Africa (MENA) region?
Since its inception in 2008, the ITFC has approved a wide range of financing to support the region’s energy security, and economic growth. ITFC has also financed other strategic sectors such as healthcare (import of pharmaceutical products) and industry to support exports (for example steel and phosphate).
ITFC also seeks to accelerate its support to the private sector by adopting innovative approaches in which it has a greater comparative advantage. In addition, ITFC offers financing operations which are combined with technical assistance and a trade development component.
ITFC supports the development of relations between MENA and sub-Saharan Africa through activities aimed at accelerating trade, financing the private sector, including financial institutions. This also includes sharing the experience and expertise of the Arab and sub-Saharan member countries of the Organisation of Islamic Cooperation (OIC).
Finally, to reach out to more small and medium-sized enterprises (SMEs), ITFC has just created a Private Sector Division. This division will be responsible for providing letter of credit (LC) issuance and confirmation services, in addition to Murabaha financing to institutions and commercial banks, which in turn finance SMEs and private sector clients. These transactions help promote Islamic finance and Sharia-compatible financing instruments.
Regarding Africa, do you think that the main targets of the SDGs will be reached as planned?
For ITFC, Africa is an important geographical area with many member countries. Many changes have affected our daily lives, forcing us to innovate. This year has been a year of reflection on the future and the role we see ourselves playing. The fifth edition of our Annual Development Effectiveness Report (ADER) entitled “Embracing Disruption to Build Back Better” illustrates the solutions and programmes ITFC has in place for trade development.
The health sector has not been ITFC’s only priority. Given the economic impact of the crisis, ITFC has among other things disbursed $484m for food imports to secure affordable, safe, and sufficient food supplies for more than 25m households in OIC member countries. This resulted in a 15% increase in ITFC’s funding for the food security sector.
A real continental mobilisation reinforced our convictions and our commitment to continue investing in programmes such as the Arab African Trade Bridges (AATB) programme and intra-African and intra-OIC trade promotion initiatives.
How do you reconcile the necessary long-term investments with emergency responses?
The pandemic has caused great disruption that has affected our economies and societies. It has also caused us to rethink our operational approach. There will be no return to the “old normal”. By moving forward, ITFC has laid the foundation to better rebuild in a post-Covid-19 world. A more inclusive, sustainable, and resilient future in our member countries can be achieved by focusing more on the SDGs and adopting new technologies as key tools for greater impact in our member countries.
Is the ITFC focusing on new technologies?
Digitalisation has created new opportunities for international trade. Admittedly, this trend began before the pandemic, but it gained momentum in 2020 when digital technologies and e-commerce became effective tools for a robust recovery.
Knowing that the digital divide poses a serious threat and could prevent equitable sharing of benefits, ITFC aims to ensure that digitalisation is fair and inclusive. In 2020, ITFC successfully launched e-trade solutions for some clients and will redouble its efforts to encourage inclusive trade through new digital solutions.
What lessons has the crisis taught us about international trade?
ITFC and its partner, the Statistical, Economic and Social Research and Training Centre for Islamic Countries (SESRIC), have recently developed a technical report on the potential impacts of the African Continental Free Trade Area (AfCFTA) on selected OIC member countries, namely Côte d’Ivoire, Egypt, Guinea, Mozambique, Tunisia, and Uganda.
ITFC believes in the need to support investments in smart infrastructure to improve connectivity and allow for a smoother flow of goods and people, as well as the protection of vulnerable segments of societies to achieve more balanced growth.
The AfCFTA is an important opportunity for Africa to become more integrated and create cross-border value that will be reflected in the socio-economic growth of the continent. The expected results are not limited to international trade alone. AfCFTA will support greater economic integration and promote the competitiveness of domestic industries. It will facilitate a better allocation of resources and help attract more foreign direct investments.