HSBC Holdings has signed a memorandum of understanding (MoU) to provide letters of credit (L/Cs) in a programme to facilitate Shariah-compliant trade financing activities operated by an affiliate of the Islamic Development Bank (IDB).

The affiliate, International Islamic Trade Financing Corp (IITF), hopes to disburse over US$2 billion of trade financing to companies in Asia, the Commonwealth of Independent States, the Middle East and Africa.

Boost trade

The programme aims to boost trade amongst the 57-member countries of the Organisation of the Islamic Conference.

HSBC will provide the L/Cs on behalf of IITF customers who import or export goods and offer syndication and co-financing to help boost Islamic trade finance.

Trade growth

Under the MoU, IITF is also expected to invest in HSBC's Shariah-compliant overnight commodity Murabaha investment product.

Total trade finance amongst OIC member states, which include Saudi Arabia, Malaysia and Turkey, is expected to reach US$4 trillion by 2012.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.