Technically similar,Principally different,Perfectly coexisted.Mr. Albayrak (Kuveyt Turk) described the Islamic International factoring within these words.During the recently held GTR Turkey, Harun Celik, Senior Manager, ITFC Istanbul Regional Office, Dr. R. Ahmet Albayrak, Kuveyt Turk Bank Executive Vice President of Corporate and International Banking and FCI Regional Director Betül Kurtulus discussed Islamic International Factoring and Islamic Finance in the context of the country’s potential for becoming a hub for sharia-compliant trade finance. This conversation continued, centering on the recent partnership between ITFC and FCI, and its potential implications.Mr. Çelik presented ITFC’s Trade Solutions and an overview of the Islamic Finance sector in Turkey. He was mainly focused on Islamic International Factoring in view of the collaboration between ITFC and FCI.Mr. Albayrak shared his experiences as a practitioner, explained their way as an Islamic bank, how they perceived factoring in general by embedding it into their business model. And also, he mentioned the potential and value addition for Turkish SMEs and value for Kuveyt Turk.As FCI, we had the opportunity to discuss and explain our new product, with two of our members.Traditional international factoring is in full conformity with Islamic Shari'a. While factoring itself is in conformity with the Islamic rules. The agreement between the parties should also be Shari'a compliant. That's the reason why the interfactor agreement and the General Rules for International factoring (GRIF) have been reviewed and modified under the above requirements by creating a supplementary agreement for Islamic international factoring. Islamic International Factoring means the Islamic way of doing “international factoring’’. The Supplemental Agreement of Islamic International Factoring modifies a few of the GRIF. The supplemental agreement is based on Wakalah, meaning assignment. The only differences are that what is called “interest” in the article 26 of the GRIF, is called “late payment amount” and some products cannot be factored in the Shari’a compliant agreement. When we look at these general rules, we see minimal differences between the two products. There is no difference between a transaction structured within the framework of international factoring rules. The difference arises from the way of funding. FCI is responsible for creating rules and regulations and facilitate trade between our members in exports and imports. Transactions produced in this way can be financed in an Islamic or conventional way, according to the preferences of our members.Traditional international factoring is in full conformity with Islamic Shari'a. Since Shari'a allows trade with different religious, international factoring is not necessarily done between factors in two Islamic countries or companies. The transaction between one Islamic and one non-islamic factor is also possible.
Turkey’s potential to become a hub for Shari’a compliant Trade Finance