World’s first Sharia-Compliant Supply Chain Finance Platform launched Tawreeq Holdings targets SME and Corporate cash flow challenges

  • Tawreeq Holdings launches innovative supply chain finance platform offering SMEs liquidity and cash flow solutions
  • Working capital solutions will address $260 billion credit gap for SMEs in MENA
  • Trade receivables securitisation will play key role in Dubai’s vision of becoming global capital of Islamic economy

25 January 2015, Dubai, UAE – Tawreeq, an independent Dubai/Luxembourg -based group with entities licensed by the DFSA and Luxembourg, has launched a supply chain finance platform targeting the small and medium-sized enterprises (SMEs) and their corporate clients across the region. The novel Sharia- compliant trade receivables securitisation platform is a world first. Supply chain finance is a well-developed concept in mature markets and has been successful in providing the support required by SMEs to grow. Tawreeq takes an innovative approach to the concept, addressing the region’s credit gaps through Sharia-compliant factoring, reverse-factoring and ethical management of the entire cycle of supply chain finance. “SMEs are the bedrock of the region’s economy but they face bureaucracy and countless financing challenges,” said Haitham Al Refaie, Co-Founder and Group Chief Executive Officer at Tawreeq. “We want to help SMEs do business more efficiently and grow rapidly using a Sharia-compliant solution that takes the pain out of cash flow management.” SMEs make up as much as 90% of the businesses in the region and employ the vast majority of workers. But they face massive challenges in managing their cash flow and getting the working capital they need. “Banks are reticent to lend to small businesses as they often require the same level of filing and expense no matter the size of the loan,” said Al Refaie. “The time and cost associated with financing often makes such services prohibitive for most SMEs, resulting in a massive credit gap that has kept most small businesses from reaching their potential. “We welcome this new locally-innovated platform, which adds yet another dimension to the wide range of efforts focused on supporting SMEs in the region, while also helping to forward Dubai’s vision towards establishing itself as the capital of the Islamic economy,” said H.E. Essa Kazim, Governor of Dubai International Financial Centre (DIFC) and Chairman of DIFC Authority. “Working capital is a major challenge for SMEs and solutions targeted at this critical sector are of paramount importance as they will play a role in shaping a supportive and resilient economic environment in which SMEs can prosper.”

Tawreeq tackles those challenges through cash-flow tools known as factoring and reverse factoring. Factoring is a short-term cash-flow solution in which a business sells its accounts receivable for a nominal fee while reverse-factoring entails the extension of payment terms of buying corporates to match it with their receivables.

Tawreeq goes further by offering businesses a Sharia-compliant method that allows a wide range of businesses, both in the region and internationally, easy access to a supply chain financing cycle for the first time.

“Our platform allows us to serve corporates and SMEs using an automated, cloud-based and paperless process that takes less than seven days to approve a transaction,” said Al Refaie.

“What we are essentially doing is providing immediate cash flow and liquidity to SMEs by buying their receivables,” said Harish Parameswaran, Co-Founder & COO of Tawreeq Holdings. “At the same time, our proposition promises robust yields for institutional and other investors who choose to benefit from an alternative asset class that addresses this critical market need, while we also offer corporates the opportunity to maximise their corporate treasury yields by partaking in these short-term, fast-cycle investments.”

Tawreeq’s Board of Directors is comprised of leading figures in the region’s economy, many of whom have had extensive experience in the financial services sector and more specifically with Islamic finance. Their combined experience will bring added depth and insights to the Board and enable it to steer Tawreeq’s ambitious growth plan.

“With SMEs accounting for a major portion of the GDP in our region, Tawreeq’s unique platform is an enabler that will bolster this sector’s prospects by overcoming longstanding constraints to its development,” said H.E. Suhair Al-Ali, member of the Board of Directors of Tawreeq.

Dr. Mohd Daud Bakar, member of the Board of Directors of Tawreeq noted, “The emergence of Tawreeq brings a much needed and cutting edge investment platform to the global Islamic finance industry. It is a Sharia-compliant investment vehicle that has short-term bias, above-market returns, and assists the real economy.”

Dr. Bakar added, “focusing on the SME sector will surely have wide appeal in both MENA and the far- East.”

The company led a year and a half long development process to devise a Sharia-compliant workflow for supply chain finance. The novel offering has at its core a Sharia-compliant component proprietary powered by an international IT platform that seamlessly connects all elements under a single, cloud- based ecosystem that allows global reach and global service.

“Our team of financial services veterans includes supply chain finance experts and prominent former bankers. They have led a rigorous development and testing process to ensure that the Sharia-compliant services and products we deliver offer unrivalled speed, efficiency, and returns,” said Parameswaran.

Tawreeq has worked closely with Amanie Advisors, the global Islamic finance advisors, and their respected international Sharia supervisory board to ensure Sharia compliance and certification of its products and processes. Tawreeq’s operating units are also licensed and regulated by the Dubai Financial Services Authority (DFSA), Luxembourg and the Department of Economic Development of Dubai.

“All our work will support efforts to cement Dubai’s position as the global capital of the Islamic economy as outlined by His Highness Sheikh Mohammed bin Rashid Al Maktoum,” added Parameswaran.

Tawreeq set out to make sure every aspect of its operations and offerings, from structure and processes to profit rates and workflow, adhere to Sharia principles and ensure they are Sharia-certified. Amanie, among other international Advisors, will continue to serve as Tawreeq Holdings’ effective Sharia board as the group continues to develop new products for the market.

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About Tawreeq Holdings

Tawreeq Holdings, the first Sharia-compliant alternative financial services group of its kind, includes four entities operating under one umbrella. They include: Tawreeq Investments licensed and based in Luxembourg; Dar Al Tawreeq a Dubai-based company offering forfaiting and factoring services, and which has developed, along with its international IT partners, the trading platform and the links between corporates and SMEs; iSCF Capital Limited, a DIFC-based company that connects local and regional corporates with international suppliers and is focused on advising and arranging the reverse factoring transactions, and HMR Consulting, an Abu Dhabi based company that collaborates between Corporates and SMEs on the platform.

Each entity will play a role in partnering with local, regional and international SMEs, corporates, government entities, financial institutions and investors to provide a novel approach to supply chain finance and support the development of the region’s supply chain finance offering. As the global supply chain finance industry continues its rapid growth, demand in MENA, which accounts for only 2 percent of the market, will continue to grow.

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About DIFC and Islamic economy

In line with His Highness Sheikh Mohammed bin Rashid Al Maktoum’s vision; Dubai has all the right ingredients to become the world’s capital for the Islamic economy. DIFC is central to delivering on this promise, as Islamic finance is considered one of the centre’s core sectors. DIFC, working closely with Dubai authorities has developed a regulatory and legislative framework that is conducive to the growth of the industry, in a secure and productive environment. Furthermore three of the Centre’s board members are serving on the committee currently overseeing the implementation and growth of the Islamic initiative.

Islamic activity in DIFC is regulated by the Dubai Financial Services Authority, which requires that firms conducting Islamic activities put systems in place to ensure that the business is conducted in accordance with Shari’a. This includes the appointment of a Shari’a Supervisory Board (SSB), which must include at least three competent scholars. An SSB also is required of Islamic funds.

The law regulating Islamic financial activities also requires that any firm conducting Islamic financial business must have a special endorsement on its license. This is applicable both to wholly Islamic firms and to conventional institutions operating Islamic windows.