News From : DagangHalal.com (05 Feb 2014)
Feb 4 (Reuters) – London-based Umex Securities has launchedan Islamic trade finance service targeting firms in the halalsector, addressing their limited access to sharia-compliantworking capital and financing.
Umex aims to tackle a longstanding industry dilemma: halalcompanies, which produce consumer goods according to Islamicprinciples, rely mostly on financing from conventional banksdespite Islam’s ban on interest payments.
While some banks do offer Islamic trade financing, thistends to focus on large commodity-related deals while neglectingsmaller firms, said Mahesh Jayanarayan, chief executive of UmexCapital Markets Group, the parent company of Umex Securities.
“Islamic banks, like conventional banks, are payingattention to provide trade finance for big business, but less toSMEs (small and medium-sized enterprises). We can safely saythat Islamic banks have failed their own backyard.”
Last July, for example, the Saudi Arabia-based Islamic TradeFinance Corp extended $358 million of financing to Jordan forenergy and petroleum products. Similar finance has been offeredto Egypt, Mali, Tajikistan and Tunisia. Such deals are promptingIslamic and Western banks to ramp up their efforts in Islamictrade finance involving rich Gulf economies.
But deals specifically designed for halal firms are rare,causing those firms to resort to short-term money lenders tobridge their working capital needs, said Jayanarayan.
“The halal sector is way down the list of priorities forboth Islamic and conventional banks in the UK and Europe.”
While halal is most often associated with food, the marketfor such products extends into other consumer goods such astravel, clothing and cosmetics.
Umex will offer its Islamic trade finance service, calledUmex Trade Bridge, first in Britain followed by other Europeanmarkets such as France, Germany, Belgiu
m and Italy. “We will consider other countries where the legal structuresare in place to provide such financing. We can safely say thatoutside of Europe our next destination will be the UAE (UnitedArab Emirates).”
Further expansion would be through partnerships or franchisemodels, Jayanarayan added.
Umex Trade Bridge provides Islamic financing facilities forterms of 15 to 120 days, with amounts ranging from 50,000 pounds($81,500) to a maximum of 250,000 pounds.
The principal financing models used are murabaha and wakalacontracts, both common Islamic structures, which have beenvetted by sharia scholars including Bahrain-based Sheikh NizamYaquby and UAE-based Mufti Aziz Ur Rehman.
“For plain vanilla transactions we use traditional Islamicmodels. Where transactions require complex structures, we willresort to hybrids of Islamic models.”