Tawreeq launches Shari'ah Compliant Supply Chain Finance Platform

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 Shari'ah-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 Shari'ah-compliant solution that takes the pain out of cash flow management.”

SMEs make up as much as 90 per cent 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.

“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 has worked closely with Amanie Advisors, the global Islamic finance advisors, to ensure Shari'ah 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.

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…focusing on the SME sector will surely have wide appeal in both MENA and the far-East."

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