Bangladesh-based Mutual Trust Bank (MTB) has signed a master murabaha agreement with the International Islamic Trade Finance Corporation (ITFC), a subsidiary of the Islamic Development Bank (IsDB).

This agreement is designed to enhance Shariah-compliant trade financing for MTB, particularly in supporting businesses engaged in international trade, including those looking to deal on a letter of credit (L/C) basis.

Impact on L/Cs

Under this agreement, ITFC will provide funding for MTB's trade-related transactions, enabling the bank to offer better financing options to importers and exporters.

MTB will be able to facilitate Islamic L/Cs under murabaha structures, where the bank purchases goods and sells them to the importer at a profit rather than charging interest.

Improved liquidity

By securing financing from ITFC, MTB can enhance its liquidity to support businesses that require L/C-based trade finance.

This arrangement is particularly beneficial for businesses importing essential commodities such as energy, raw materials, and food products.

Boosting Islamic banking

This agreement strengthens Islamic trade finance solutions in Bangladesh, where MTB operates.

It also provides smaller businesses with greater access to Islamic trade financing, helping them participate in global trade.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.