Meezan Bank, one of Pakistan's first and largest Islamic commercial banks, has announced a new strategic partnership with the International Islamic Trade Finance Corporation (ITFC) under its letter of credit (L/C) confirmation facility.

The ITFC facility aims to facilitate trade flow by assuring exporters and issuing banks that transactions under the facility are backed by the corporation so that credit risks are eliminated and payment is guaranteed.

SME support

The L/C confirmation facility will support private sector clients, including small- and medium-sized enterprises (SMEs).

The facility involves working with local banks in Organisation of Islamic Cooperation (OIC) member countries to facilitate various import transactions.

ITFC acts as a backstop confirming bank, guaranteeing payment to exporters even if the issuing bank (in the importer's country) fails to meet its obligations.

First bank in Pakistan

Meezan Bank is the first bank in Pakistan to partner with ITFC for the L/C confirmation facility.

This Islamic trade facility aims to enable the bank to extend geographical coverage by leveraging the ITFC network. It also aims to enable the bank to handle longer term L/C confirmation transactions, typically of 6 to 12 months.

"The L/C confirmation agreement strengthens our position in the market, enabling us to capitalise on new opportunities and facilitate international Islamic trade," according to deputy chief executive officer of Meezan Bank, Syed Amir Ali.

Trading benefits

The ITFC's primary objective is to advance trade among OIC member countries. Commencing operations in January 2008, the corporation has provided over US$75 billion of financing to member countries, making it a key provider of trade solutions for these countries' needs.

The corporation also helps entities in member countries gain better access to trade finance and provides them with the necessary trade-related capacity-building tools, with the aim of enabling them to successfully compete in the global market.

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