IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Islamic structured trade finance: a case of cotton production in West Africa

  • Ahmet Suayb Gundogdu
Registered author(s):

    Purpose – The purpose of this paper is to show a creative way to fulfill financing needs of entities involved in pre- and post-harvest production activities in extreme cases while mitigating inherent risks by Islamic structured trade finance from the real-life case of cotton production in Burkina Faso. Design/methodology/approach – The existing Islamic structured finance design for SOFITEX was analyzed in details so as to provide clear understanding of the subject matter. This structure was evaluated and a new design is proposed to better accommodate the financing need of SOFITEX. Findings – There are some inherent drawbacks, explained in details, of the existing Islamic finance structure. Salam contract for pre-harvest input financing in favor of farmers can, unlike existing structure, accommodate the complete supply chain financing solution, hence, support the whole production cycle from input procurement to the exports of cotton fiber. That is, it fits better for financing the agricultural sector. Research limitations/implications – The case and the structure studied in depth are limited to the cotton sector. This could be widened in subsequent researches. Practical implications – Islamic finance instruments provide us enough room to fulfill financing needs in extreme cases as a better alternative to conventional financing tools. A method of mark-up calculation for structured cotton trade finance is developed for Murabaha and Salam contracts. Originality/value – The paper sheds new light on how to finance the agricultural sector starting from input procurement to the sale/export by Islamic finance instruments. It also shows how to get guarantees in the form of commodities in warehouse rather than bank guarantees, mortgage, sovereign guarantees, etc.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.emeraldinsight.com/journals.htm?issn=1753-8394&volume=3&issue=1&articleid=1852709&show=abstract
    Download Restriction: Cannot be freely downloaded

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Emerald Group Publishing in its journal International Journal of Islamic and Middle Eastern Finance and Management.

    Volume (Year): 3 (2010)
    Issue (Month): 1 (April)
    Pages: 20-35

    as
    in new window

    Handle: RePEc:eme:imefpp:v:3:y:2010:i:1:p:20-35
    Contact details of provider: Web page: http://www.emeraldinsight.com

    Order Information: Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
    Web: http://emeraldgrouppublishing.com/products/journals/journals.htm?id=imefm Email:


    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eme:imefpp:v:3:y:2010:i:1:p:20-35. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.