Launching of Barak Shariah Trade Finance Fund
Barak Fund Management, after some consideration over the past few years, has decided to go ahead and launch a Trade Finance Fund focusing on fully Shariah-compliant transactions. The Fund will be based on the same underlying strategy as the current flagship Barak Structured Trade Finance Fund (short-term, asset-backed alternate credit lending in the sub-Sahara African region), however will be mandated to invest in Shariah-compliant trades.
Shariah is the Muslim or Islamic Law which regulates many aspects of a Muslim’s life, including in this context the type of investments allowed. For example, interest earned is considered usury according to the underlying fundamentals of Shariah investing, thus prohibiting bonds and other similar investments. A Shariah-compliant Fund is an investment vehicle structured in accordance to Shariah rules. It is important to note that while the funds are required to be fully compliant with Shariah rule (Barak is utilising Scholars in the region to endorse each transaction), the companies managing the funds do not necessarily need to be Shariah compliant.
Barak will be partnering with the Bahraini Investment Bank Ibdar Bank, which operates under a wholesale Islamic banking license and regulated by the Central Bank of Bahrain. Ibdar is going to be acting as the Placement Agent of the Fund within the GCC region (Bahrain, UAE, Saudi Arabia, Kuwait), and has already been in extensive discussions with prospective investors in the build-up to the launching of this new Barak Fund. Ibdar will further be seeding the Fund with initial capital of US$10 million.
The demand for Shariah-compliant investment vehicles has been growing globally over the past decade or so, as has the appetite for the alternative asset class of trade finance. With the Fund focusing on Africa, which the Middle Eastern investor base knows particularly well, coupled with it being a US Dollar-denominated Fund, the opportunity for rapid growth of the Fund is certainly something Barak is excited about. Ibdar has forecasted investor inflows of US$100 million within the first 12 months of the Fund’s launching. The Fund is going to be launched mid-November 2016.