Jordan has signed up to a five-year, $3 billion loan package with the International Islamic Trade Finance Corporation (ITFC) to finance the import of energy and food staples.
Minister of Planning and International Cooperation Imad Fakhoury said the country’s private sector would also benefit from the financial and advisory services of the ITFC.
The Jeddah-based ITFC promotes Islamic trade financing, which follows religious principles and bans interests on payments. Its 56 shareholders extend direct financing and cooperate with other providers to support sharia-compliant trade. The Islamic Development Bank is the largest shareholder in the ITFC, with a stake worth $266 million, according to Reuters. The ITFC has total paid-up capital of $701.9 million.
Jordanian economist Jawad Anani welcomed the deal and said the ITFC’s system has proved a successful bridge-financing instrument to fund the purchase of large amounts of commodities. “This facility was originally created by the Islamic Development Bank in Jeddah and then developed into a full-fledged institution because it worked very well,” Anani said. “Both people and countries found it was a very convenient tool for them to use.”
Anani said that instead of charging interest on the loans it provides, the ITFC buys the commodity and resells it at a profit. “It finances the purchase of certain goods, and what the borrower eventually pays is the slightly higher price that has been agreed upon. It is like a short loan,” Anani explained. “It is more relaxing than a typical loan because it allows one to pay back once the cash is there without resorting to financial reserves.”