Barclays Bank of Kenya has unveiled an Islamic trade financing product to enable its customers to manage their businesses through various trade facilities that are Shariah law compliant.
The La Riba trade finance is a short-term finance facility aimed at enabling trade operations for the bank’s customers but in compliance with Shariah law.
This is meant to cover buyers and sellers during trade cycle funding gaps for both local and international trade transactions.
The lender’s customers will now be able to finance goods, plant and machinery, equipment, or any tangle items of value from a third party.
During the launch of the product yesterday, Barclays Bank of Kenya head of commercial banking Paul Wainaina said through the La Riba trade finance they are offering working capital and Islamic guarantees to their customers.
“The bank is standing surety for their customer. We are telling our customers that they can do their business, and tell the supplier or person who is offering the services, we are confident that this customer of mine will be able to pay. But in case they are unable to pay we’ll come and pay for them,” said Mr Wainaina.
The difference between a conventional and Shariah guarantee is that one has Riba and the other does not.
Within the Shariah guarantee, the bank becomes an agent, and what a customer pays is an agency fee which is permitted within Quran.
Mr Wainaina said when importing, the bank will offer a letter of credit, hence transferring the risk of payment from an individual to the bank.
Shariah Advisory Committee Member Sukyan Omar said the trade finance has been approved by the board.
According to the Kuala Lumpur-based Islamic Financial Services Board, the global demand for banking services and products that comply with Shariah law is increasing by about 15 per cent per year.