Read Full Magazine Here. The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) is a member of the Islamic Development Bank (IsDB) Group.
The driving ambition behind the creation of ICIEC was to strengthen the economic relations between member countries of the OIC on the basis of Islamic Shari’ah.
ICIEC was established to provide investment and export credit insurance solutions compliant with Shariah Principles.
ICIEC provides credit and political risk insurance to sustain imports of strategic commodities, to ensure investment protection, and to minimize volatility.
ICIEC’s vision is to be recognized as the preferred enabler of trade and investment for sustainable economic development in Member Countries. Its mission is to facilitate trade and investment between member countries and the world through Shariah-compliant risk mitigation tools. Growth and success achieved by ICIEC were made despite the increased level of competition in the insurance sector, between national companies. This success makes ICIEC looks forward to more successes in its quest to reveal its ability to lead the Kingdom’s insurance sector internationally.
Oussama Abdel Rahman Kaissi is the Chief Executive Officer of ICIEC starting from 8 September 2015.
Oussama Kaissi has over twenty-eight years of diverse experience in the insurance and Takaful industry. Out of which 16 years are at the senior executive level. He is the founding CEO of the National Takaful Company, Watania, had also established and led Abu Dhabi National Takaful from inception till 2010. Prior to this he was the GM of ARIG, Bahrain, the MD of ALIG, Lebanon and the Senior Head of Operation in ARIG, Bahrain.
Graduated in 1987 from Indiana University, USA and having worked in USA, UAE, Bahrain and Lebanon both in conventional and Takaful companies, Kaissi has got vastly diversified exposure to different markets, cultures and business models.
In light of such success, Oussama Abdel Rahman Kaissi made wonders through his wise leadership, dedication and hard work that took ICIEC to new heights.
Oussama Abdel Rahman Kaissi’s immersion in insurance material sparked a desire to effect substantial change through his leadership style.
Fascinated by insurance since his early life, Kaissi created his own philosophy on success and insurance business.
He is one of the most sought-after names in the insurance industry.
Since taking over as the CEO of ICIEC, till today, Oussama Abdel Rahman Kaissi has, through his dedication, increased its profits.
Having graduated from Indiana University, USA with a degree in Economics Oussama Abdel Rahman Kaissi began his career in the USA, , UAE, Bahrain, Lebanon and the Kingdom of Saudi Arabia where he assumed key positions over the span of 28 years and eventually working his way up as the Chief Executive Officer to ICIEC, one of the Kingdom’s fastest-growing, sharia-compliant insurance provider to various governments and countries.
In BUSINESS LIFE exclusive interview, the highly reputed Oussama Kaissi shed lights on very hot subjects such as Takaful future and the industry’s current and future challenges as well Cyber reinsurance markets and the impact of Russian-Ukrainian war on the insurance market and on the economy. Oussama Kaissi has plans to revolutionize the insurance business through futuristic technology.
In light of the changes in the global economy, Oussama Abdul Rahman Kaissi as Chief Executive Officer of ICIEC believes that the insurance industry is evolving to meet customers’ present and future needs.
BL: What was the impact of the COVID-19 pandemic on ICIEC’s operations and activities, and can you expand on your pandemic response strategy and activities?
Oussama Kaissi: The Omicron variant was a stark reminder that the COVID-19 pandemic is far from over, and its impacts are with us potentially for years to come. ICIEC’s response to the pandemic forms an integral part of the IsDB Group’s $2.4 billion Strategic Preparedness and Response Program (SPRP) with its “3 R’s” (Respond, Restore, Restart) to combat the health and socio-economic effects of the pandemic in member states.
ICIEC’s initial contribution of $150 million to this Program and contributions to other IsDB Group initiatives, including its dedicated risk mitigation solutions for imports, exports, and investments. As of the end of 2021, ICIEC approved US$780 million in insurance cover in supporting the procurement of medical equipment, food commodities, crude oil, and gas, as well as financial support to SMEs and the development of healthcare infrastructure. Sector-wise, the health sector accounted for US$275 million, the energy sector for US$271 million, the food sector for $161 million and SMEs for US$61 million. These interventions have benefited several Member States, including Tunisia, Burkina Faso, Mauritania, Senegal, Cameroon, Côte d’Ivoire, Nigeria, Togo, UAE, Oman, Jordan, Egypt, Pakistan, Bangladesh, Uzbekistan, and Iraq.
In 2021, ICIEC worked hard to navigate through the COVID-19 pandemic. The Corporation continues supporting trade and investment in the OIC countries throughout the crisis, but it has also stepped up its capacity and responded to the urgent demands from the Member States. Through collaborative efforts amongst member institutions, IsDB Group has been able to leverage complementary strengths and enhance the impact of the Group’s response to the crisis.
The IsDB Group was the fastest among peer institutions to respond to the pandemic. In 2020, during the pandemic’s peak, ICIEC’s business insured reached $9.8bn, of which $5.396bn was directed to various sectors, including sustainable energy, $2.103bn to manufacturing, $586m to infrastructure, $370m to healthcare and $861m to services.
A vital component of the ICIEC strategy is the COVID-19 Emergency Response Initiative (ICERI), launched jointly with the Islamic Solidarity Fund for Development (ISFD), the poverty alleviation arm of the IsDB Group. The programme is aiming at leveraging the ISFD grant to support up to US$400 million in trade finance for the procurement of urgent goods, including medical equipment, pharmaceuticals, essential food supplies, and oil and petroleum product imports. ICIEC undertakes the operational tasks of insuring and monitoring the transactions in its ordinary course of business, working closely with banks covering exports and imports, especially commodities. Several strategic projects have already been supported through ICERI. This collaboration continues as member states continue to recover from the pandemic.
In 2021, the ICERI program saw an increase in trade-related transaction approvals totalling US$271 for Bangladesh, Cameroon, Mauritania, Senegal, Tunisia and Benin. The cover enabled them to import critical goods at discounted rates and strengthen their healthcare and food sectors.
ICERI shifted its focus in 2021 to COVID-19 vaccine procurement in its Least Development Member States. We expect to support around US$100 million worth of COVID-19 vaccine imports by year-end 2022. Discussions are ongoing at the level of the IsDB Group to further expand the Program’s scope.
We also jointly launched with the IsDB the $2 billion COVID-19 Guarantee Facility (CoGF) in 2020, specifically aimed at supporting the private sector, particularly COVID-hit industries in member states, to attract cross-border investments. Last year, we launched the Co-Guarantee Platform for Africa (CGPA) with partners to increase the volume of insurance and guarantee solutions available to project sponsors and their bankers. ICIEC, throughout the pandemic, continued to support member states and designed a specialized program, including subsidies and grants, enabling them to get access to preferential terms for LC confirmations. ICERI is a unique solution and is still in the up-boarding stage and will continue to expand this initiative in the future.
ICIEC facilities on the ground are helping mainly in the trade finance and credit enhancement areas. COVID-19 affected the business of corporates, agencies, and SMEs through the disruption of supply chains, especially in the vital farming sector. ICIEC helped support these entities to mitigate the impact of these disruptions, such as the travel restrictions and the lack of funding due to the diversion of resources to other COVID mitigation measures, including procurement of equipment and vaccines.
Before the pandemic, we made due diligence missions, studied upclose the credit environment, visited our counterparts at government levels and met our clients. This process was brought to a halt during the active two-year pandemic era. We needed to adjust our business model to the new reality of doing business remotely. This reality meant that we had to become more flexible in our underwriting approach without negatively impacting the interest of the member states, compromising our risk management strategy and the quality of our products and services. Despite the above impediments, we managed to carry out our mandate in supporting our member countries, primarily through IT solutions and digitization.
In Senegal, thanks to ICIEC’s risk mitigation tools, we managed to secure private financing to rehabilitate a major water collection system in Dakar. In Côte d’Ivoire, ICIEC provided a Euro 142 million cover for a Deutsche Bank financing of two new hospitals. Despite the challenging environment, ICIEC maintains its resilience in mitigating these risks, ensuring the continued flow of international trade and sustainable investment between OIC member countries and the world. As member states slowly recover from the impacts of the pandemic, we endeavour to support them as they rebuild a healthier, inclusive and resilient OIC community with sustainability as a priority.
BL: What are the challenges facing the credit and investment insurance industry and ICIEC?
Oussama Kaissi: ICIEC’s mandate is to promote cross-border Trade and Foreign Direct Investment (FDI) in its Member States. The Corporation serves its mandate by providing risk mitigation and credit enhancement solutions to Member States’ exporters selling to buyers worldwide, and investors worldwide investing in the Member States. ICIEC also supports international exporters selling to the Member States if the transactions are for capital goods or strategic commodities.
Trade credit insurers have been resilient in 2020/21 to the effects of the pandemic, helped by sound risk underwriting, limited corporate insolvencies, and government-backed Reinsurance to maintain confidence in the sector in recognition of its importance to global trade. Credit insurers have increased their risk appetite for new business as the global economy starts to recover, notwithstanding the new impacts of the conflict in Ukraine.
Risk management is vital for all institutions, whether DFIs or private sector companies. Disruptions caused by conflict such as the war in Ukraine, health events such as the COVID-19 pandemic, natural disasters due to climate change, catastrophic events such as earthquakes, terrorism and civil unrest, amongst other risks, unleash a spate of existing and new risks which all stakeholders have to confront and try to mitigate. The impact, however, is country and sector-specific. Egypt, for instance, is largely unaffected by the higher energy prices because it is self-sufficient in oil and gas. But it imports 86% of its wheat from Ukraine.
Many lessons were learned from the pandemic experience. ICIEC, for instance, immediately implemented a comprehensive suite of risk management measures. ICIEC Management and the Honorable Board of Directors are regularly updated with appropriate market intelligence, enabling them to respond in a swift and informed manner to new developments. To closely monitor the Corporation’s financial soundness and resilience, ICIEC – amongst other measures – introduced regular Member State vulnerability tests as well as portfolio stress tests, closely tracked overdue at the portfolio level, exchanged early-warning exposure experiences amongst IsDB Group entities and adjusted its investment strategy to be more defensive.
ICIEC also enjoys a Preferred Creditor Status from member states. In the case of complications in terms of payment issues, ICIEC has leverage to solve the issues, especially with the governments and the central banks. In 2020/2021, we encountered only four payment delays. Our experience differs from one member state to another and is best in countries with mature credit insurance culture instead of not having any national EXIM Banks or ECAs, but where there is more competition from private insurers. ICIEC member states which do not have national ECAs effectively treat the Corporation as a national ECA.
During times of uncertainties and disruptions, ICIEC, under its mandate, redoubles its efforts to ensure member states have access to essential goods, supplies, and equipment in energy, food staples, and health care to ensure no one is left behind. ICIEC has recently made significant strides to strengthen its risk management paradigm and achieved appreciable milestones. The progress achieved was significant and timely with the COVID-19 pandemic in Spring 2020, negatively impacting the Credit and Political Risk Industry and heightening credit risk defaults amongst corporates and financial institutions. The pandemic created severe economic and human challenges across ICIEC operating countries.
ICIEC took a balanced approach throughout the pandemic period, supporting the Member States to combat the pandemic while maintaining a sound portfolio with robust risk management, prudent underwriting, and loss minimization efforts. Undoubtedly, the pivotal role of Risk Management helped ICIEC successfully navigate the crisis period and uphold its strong credit profile.
This approach was further enhanced by the strong follow-up and careful monitoring using effective risk management capabilities and the management’s timely intervention in strategic key points in line with the ICIEC’s 10-Year Strategic Plan (2015-24), which the IsDB Group further underpins to enhance synergies between its sister entities to help meet their respective mandates by jointly utilizing their core competencies. ICIEC’s Plan has been revised in consonance with its 5-Year Mid-Term Strategy Review.
The Corporation considers implementing a fully-fledged Enterprise Risk Management (ERM) architecture as an enabler to achieving its strategic goals and sets the foundation for the priorities for the coming Five-Year Risk Strategy (2021-25). The ERM framework shall be bespoke and forward-looking, tailored towards ICIEC’s multilateral status and self-regulated business model adopted by the COVID-19 paradigm shift and new ways of doing business.
ICIEC has identified five megatrends impacting global trade in 2022/23. These are efforts to curb COVID-19 and its impact on trade, climate change ramifications, widening inequality, global geopolitical tensions, and technology’s ever more significant role in trade.
ICIEC priorities include the delivery of development impact, enabling Islamic finance, the development of value-based partnerships, and enabling excellence in both our staff and industry.
We plan to work closely with line ministries in the Member States towards providing the necessary awareness about the importance of trade credit and investment insurance solutions as a risk mitigation tool to encourage exporters and investors to penetrate non-traditional and new markets.
The aim is to familiarize a broader universe of exporters, manufacturers, and contractors with ICIEC products and services, including the Documentary Credit Insurance Policy (DCIP), Non-Honouring of Sovereign Financial Obligations (NHSFO) Policy, Bank Master Policy (BMP), Credit Insurance Products and the Sovereign Sukuk Insurance Policy.
The COVID-19 pandemic creates severe economic and human challenges across ICIEC operating countries and the business environment. Undoubtedly, risk management’s pivotal role helped the Corporation successfully navigate the crisis period while upholding its strong credit profile. ICIEC aims to consolidate the achievements made so far by strengthening the risk management practices and architecture to support the Corporation’s 10-year Strategy.
BL: The war in Ukraine has impacted the global economy, especially in the supply of staple grains, crude oil and gas. It has led to a spiralling of food and energy prices and, consequently, inflation pressures. What are the implications for food security, especially in IsDB member states?
Oussama Kaissi: The Ukraine War has once again highlighted the issue of food security, which keeps resurfacing thanks to the effects of climate change, natural disasters, plagues of pests, deforestation and soil erosion, opposition to genetically modified seeds, battery farming of poultry and livestock, disease outbreaks and supply-chain disruption as in the COVID-19 pandemic. Food security inertia persists partly because the issue is not a priority for governments thus far; it is misunderstood and underestimated; it becomes stalled in political infighting, procurement fraud, and corruption; and it lacks a clear Agricultural and Land Reform Strategy.
The disruption to global markets was first caused by the COVID-19 pandemic, now in its third year, and since February this year. As a result, the War in Ukraine is shaking food systems to the core, particularly in countries already grappling with the impacts of climate change and COVID-19, where more people are likely to be pushed further into poverty and hunger.
Developing countries have a lot to lose. Food systems inequality is as impactful as food import dependency, vaccine inequality, poverty and a host of other such metrics, which affect the lives of millions daily.
COVID-19 has had a devastating effect on the economies of its Member States, and IsDB Group understands their limited capacity to cope and promises them its unshakable support to overcome the crisis together and create a brighter future. The Islamic Development Bank (IsDB) Group, of which ICIEC is the Group export credit agency, is a crucial partner of member states in their development effort, especially in helping to achieve the UN Sustainable Development Goals (SDGs) and the transition to clean and just energy under the Net Zero targets of the Paris Climate Agreement.
ICIEC is committed to helping member states achieve the SDGs. The Corporation most prominently supports six SDGs with its activities: SDG 2-Zero Hunger; 3-Good Health and Well-being; 7-Affordable and Clean Energy; 8-Decent Work and Economic Growth; 9-Industry, Innovation and Infrastructure; and 17-Partnerships for the Goal.
It promotes food security in its Member States through strategic partnerships and by supporting the imports of essential agricultural commodities, imports of modern agricultural machinery, and access to financial services.
ICIEC contributes to the achievement of the SDGs in three key ways. First, it contributes to the Islamic Development Bank Group’s 10-Year Strategy (2015–2025), which is aligned with the SDGs. Second, the ICIEC mandate is to support sustainable economic development in its Member States by providing its solutions. Third, ICIEC acts as a catalyst for private sector capital to be mobilized and directed towards achieving the SDGs.
As the OIC Member States suffered a higher net-trade loss relative to the rest of the world past year, ICIEC’s contribution to facilitating trade growth has become ever more critical. This would be especially relevant by focusing on the OIC Member States struggling with their exports and not just the top 5 exporting countries representing 62% of OIC exports past year.
Another critical area of opportunity for ICIEC is focusing on the top 5 industry clusters of the OIC, especially those which are showing vital signs of resilience, such as food and agriculture. Each industry ‘cluster’ represents several sub-sectors and an entire value-chain of upstream to downstream components per sub-sector.
ICIEC sees supporting these key OIC Industry clusters’ growth as a substantial opportunity. For instance, given the Member States’ big focus on food security, tremendous opportunities exist across the related industry cluster working together with other partner entities such as ITFC, IOFS (Islamic Organization of Food Security) and others.
ICIEC has created collaboration initiatives with IsDB Group Entities. ICIEC provides credit and political risk insurance to maintain imports of essential commodities and the value of assets and reduce the degree of turbulence.
ICIEC signed an MoU in 2021 with the Islamic Organisation for Food Security (IOFS) to collaborate on attracting and promoting investment into the agriculture and food sector. Possible future collaborations may also include promoting knowledge sharing, capacity-building workshops, joint research on food security in the OIC Member States, facilitating South-South or intra-OIC cooperation through the utilization of Reverse Linkage programs, and ICIEC trade credit and investment insurance solutions.
ICIEC also signed a Strategic Partnership Agreement (SPA) with the Islamic Food Processing Association (IFPA), a subsidiary of IOFS, whereby the two entities aim to promote OIC agri-food projects, trade, and investments.
The SPA will provide ICIEC and IFPA with a general framework for collaboration, including attracting and promoting investment in agribusiness and food security; collecting due diligence, KYC and credit search documentation of prospective customers; referring potential clients; promoting joint marketing and promotion activities, and boosting the involvement of SMEs in Agri/food business.
BL: Rising inflation and disruptions in global supply chains that feed the world with essential goods lead to increased food insecurity and risks of energy supply disruption. What are your views?
Oussama Kaissi: Inflation is one of the most severe challenges facing the global economy. In the First Quarter of 2022, headline inflation (the price of all goods and services) and core inflation (excluding food and energy) were significantly above target in most advanced economies and several emerging markets. Together with other global shocks and geopolitical considerations, it has compounded the cost-of-living crisis in advanced and developing economies.
Higher inflation amid a more pronounced economic slowdown has exacerbated post-pandemic pressures for additional fiscal spending to support households. Inflation is a significant threat, especially with its potential impact on socio-political stability regarding rising prices of staples and the cost of living in general. A recent report from Moody’s suggested that countries in Africa and the MENA regions, including Lebanon, Egypt, Somalia, Namibia and Mozambique, are the most susceptible to such socio-political risks.
The IMF, in its Global Economic Outlook in April 2022, identified five key drivers of the current inflation surge. These include supply chain bottlenecks, a shift in demand toward goods and away from services, aggregate stimulus and post-pandemic recovery, a shock to labour supply, and the supply shocks to energy and food because of the Russian invasion of Ukraine.
The pandemic had two different effects on global supply chains. In the early phase, lockdowns and mobility restrictions led to severe disruptions in various supply chains, causing short-term supply shortages. Many of these disruptions have eased, although the recent surge in Omicron has renewed pressure on some supply chains. The shift in demand dynamics is underlined because much of the rise in inflation in the near term reflected inflation in durable goods (including used cars), while service inflation increased only moderately.
A warning from some economists that the sizeable fiscal stimulus in mitigating the impacts of the COVID-19 pandemic, combined with easy monetary conditions including near-zero interest rates and rising household debt, would lead to high and persistent inflation was primarily ignored by governments, preoccupied with dealing with the consequences of the pandemics on their populations. According to the IMF, about US$16.9 trillion in fiscal measures were announced globally to fight the pandemic, with relatively more significant support in advanced economies.
Labour market disruptions from the pandemic continue even two years after the onset of the pandemic. Employment rates in several countries remain below pre-pandemic levels, and in some countries, especially in the MENA and SSA regions, youth jobless is disconcertingly high.
According to Moody’s, higher food and energy prices will fuel inflation and weigh on the balance of payments and government finances of net food and oil importers, exacerbating macroeconomic challenges and external and fiscal imbalances.
The impact on Africa and the Middle East is implicit. We are seeing price hikes which could cause an escalation of hunger and poverty. Research by the International Fund for Agricultural Development shows that price increases in staple foods such as wheat, maize and sunflower oil, fuel, and fertilizers have a dire impact on the poorest rural communities who cannot absorb these price rises.
Moreover, many countries have limited fiscal policy space to cushion the impact of the war on their economies. The IMF data for Egypt, for instance, shows rising inflationary pressures from an actual 4.5% in 2021, projected to rise to 7.5% in 2022 and 11.0% in 2023 before settling down to 7.4% in 2027 over the medium term.
However, the chaotic impact of supply chain disruptions caused by the war in Ukraine is matched by the volatility in key financial indicators. On 10 May 2022, Egypt’s annual consumer price inflation rose to 13.1% year-on-year in April from 10.5% in March, according to CAPMAS, the Egyptian state statistics agency. The rise is attributed to higher food prices. Annual food inflation was up 26% - 7.6% increase on a monthly basis, compared with 3.3% monthly in January-September 2021.
The OECD estimates global GDP growth will be over 1% lower this year because of the Russo-Ukraine conflict, while inflation, already high at the start of 2022, could rise a further 2.5% on aggregate worldwide. OECD Secretary-General Mathias Cormann warns, “the commodity supply squeeze resulting from this war, is exacerbating supply chain disruptions brought on by the pandemic, which will likely weigh on consumers and business for some time to come. We need both sensible near-term and longer-term action.”
It is clear, says the OECD, that in emerging market economies, higher food and energy prices are expected to push up inflation more than in advanced economies. In particular, the threat of cereal shortages underlines the need to ensure that trade keeps flowing.
The duration of the current inflation bubble depends on the interplay between the persistence of labour market tightness, supply chain bottlenecks, the response of central banks, and the duration of the War in Ukraine and its impact on energy prices, food prices, and global growth.
Despite the shocks to the world economy, the inflation trajectory beyond 2025 depends primarily on how determined central banks are to rein in inflation and the bond and financial market’s confidence that governments are willing or able to pay their debts without adding to the inflation bubble.
BL: Can you expand on the direct impact on food prices resulting from the Ukraine conflict, especially on member countries of the IsDB?
Oussama Kaissi: Just as the global economy was finding its footing, the Russia-Ukraine military conflict has threatened to exacerbate the adverse effects of the pandemic for many emerging market sovereigns. According to Moody’s, the risks to sovereigns from Russia’s invasion of Ukraine are not as broad-based as those from the pandemic shock. Sovereigns with the most robust economic and financial links to Russia and Ukraine are most at risk.
The IMF and the international rating agencies recently warned that countries in the Middle East and Sub-Saharan Africa, including Lebanon, Mozambique, Togo, Namibia, Jordan and Senegal, are the most susceptible to political and social unrest as global oil and food prices continue to rise. The reality is that we are seeing price hikes which could cause an escalation of hunger and poverty with dire implications for global stability. Research shows that price increases in staple foods, fuel and fertilizer and other ripple effects of the conflict have a dire impact on the poorest rural communities who cannot absorb the price rises of staple foods and farming inputs that will result from disruptions to global trade.
Moody’s expects higher social and political risks due to the sustained global food and energy price shock to persist over 18 months. Higher food and energy prices will fuel inflation and weigh on the balance of payments and government finances of net food and oil importers, exacerbating macroeconomic challenges and external and fiscal imbalances.
According to the OECD, the average percentage hike in prices from January 2022 has been staggering – 88% for wheat, 79% for fertilizers, 42% for maize, and 11% for gold. This is in addition to considerable rises in crude oil, gas, and coal prices. The dependency on Russo-Ukrainian food supplies is revealing. According to the OECD, Russia and Ukraine account for 30% of world wheat exports and 14% of world maize exports. Ukraine accounts for 16% of global corn exports and 12% wheat. Ukrainian corn output has grown 140% in the last decade to reach 42m tonnes in 2021, during which Ukraine produced 33m tonnes of wheat and 10m tonnes of barley. Ukraine is also the top exporter of sunflower oil in 2021 at 23m tonnes.
Forty percent of wheat and corn from Ukraine go to the Middle East and Africa, which are already grappling with hunger issues, and where further food shortages or price increases risk pushing millions more people into poverty. Russia is also the world’s largest fertilizer producer. Even before the conflict, spikes in fertilizer prices last year contributed to a 30% rise in food prices.
The implications for IsDB member states, especially those with close import relations with Russia and Ukraine, are apparent but specific. Take Egypt, for instance. Egypt has an overall food import bill which is comparatively modest. The destabilizing effect of the war in Ukraine comes from the fact that Egypt is the largest importer of wheat in the world, importing around 23 million tonnes, worth US$5.6 billion, in 2020.
Some 86% per cent of these imports came from Russia and Ukraine in 2020 (26% from Ukraine and 60% from Russia, according to International Trade Centre data), leaving it particularly exposed to any trade and supply disruptions caused by the conflict. According to COMTRDAE and Moody’s, Egypt is the 13th most exposed country to a food price shock. Its food imports as a share of GDP is a middling 4.8%.
Flower shortages have already impacted Egypt, Lebanon and Somalia. Prices have escalated, and the spectre of food protests looms if the government fails to intervene to bring sanity to supplies and prices. Consumer prices rose in Egypt by 8.8%, driven by a 17.6% increase in food and beverage costs in February 2022. In Lebanon, it is the same with the additional lack of storage due to the 2020 blast in Beirut port that destroyed the country’s primary grain silos.
ICIEC has been engaged in mitigating the impact on food supplies and prices through allocations from its ordinary resources and participation in several targeted programs. A vital component of the ICIEC strategy is the COVID-19 Emergency Response Initiative (ICERI), launched jointly with the Islamic Solidarity Fund for Development (ISFD), the poverty alleviation arm of the IsDB Group. Since the onset of the conflict in Ukraine, the impact on food prices and supplies has effectively also been absorbed by ICERI. The Program is aiming at leveraging the ISFD grant to support up to US$400 million in trade finance for the procurement of urgent goods, including medical equipment, pharmaceuticals, essential food supplies, and oil and petroleum product imports.
ICIEC undertakes the operational tasks of insuring and monitoring the transactions in its ordinary course of business, working closely with banks covering exports and imports, especially commodities. Several strategic projects have already been supported through ICERI. This collaboration continues as member states continue to recover from the pandemic and also face new challenges.
In 2021, the ICERI program saw an increase in trade-related transactions approvals of US$271 million for the benefit of our Least Developed Member Countries (LDMCs), including Bangladesh, Cameroon, Mauritania, Senegal, Tunisia and Benin. The allocations enabled them to import critical goods at discounted rates and strengthen their healthcare and food sectors.
Overall, ICIEC has deployed over US$770 million over the last year in insurance capacity in supporting the procurement of medical equipment, food commodities, crude oil, and gas, as well as financial support to SMEs and the development of healthcare infrastructure. This has benefited the several Member States, including Tunisia, Burkina Faso, Mauritania, Senegal, Cameroon, Côte d’Ivoire, Nigeria, Togo, UAE, Oman, Jordan, Egypt, Pakistan, Bangladesh, Uzbekistan, and Iraq.
BL: The fact that the 47th IsDB Annual Meetings are being held in Sharm El Sheikh, Egypt, and so too was the 3rd Board of Governors of the Arab Africa Trade Bridges (AATB) Program in March suggests that trade between the MENA region and SSA is becoming a priority. How vital are Intra Arab-African trade and economic relations for ICIEC?
Oussama Kaissi: Enhancing Intra-Arab African trade and investment is a core mandate of the OIC, the IsDB Group and ICIEC. Some 27 continental African countries, combining North African and Sub-Saharan African (SSA) states, are members of the IsDB Group, of which 20 have acceded to ICIEC membership.
An essential conduit for enhancing intra-Arab Africa trade and investment is the AATB Program, established in 2010 by ICIEC, IsDB, OPEC Fund for International Development, Afreximbank, BADEA, International Islamic Trade Finance Corporation, and the Governments of Egypt, Morocco, Senegal and Tunisia.
The AATB Program has demonstrated its importance as an entry point to enhance the mandates of participating stakeholders further, particularly in transaction origination, co-financing, technical support, expertise and tailored risk mitigation solutions to increase bankable transactions. ICIEC’s commitment to ATTB is further underlined by its closing of US$5.6 billion of transactions under the Program in the last decade, accounting for 9% of its business insured during the period.
Economic recovery in Africa depends on access to vaccines and their timely rollout. Trade and investment will flourish once shocks begin to dissipate, both in imports and exports. Given the current uncertainties and challenges of climate change, the AATB Program is an important conduit to promote value chain projects to enhance access to Arab and African markets, capitalize on digitization; and forge a transition to clean energy in line with development objectives. ICIEC reaffirms its commitment to the AATB Program with its unique suite of de-risking solutions.
ICIEC-AATB cooperation assumes greater importance in the context of the African Continental Free Trade Agreement (AfCFTA), unlocking Africa’s economic potential, enabling more significant cross-border trading and developing industrial capacity, which will take advantage of the continent’s natural wealth.
Credit and political risk insurance solutions can boost trade finance volume to meet the objectives of both ATTB and infrastructure investments. The needs of Arab and African countries are far more than the capabilities of the member institutions of AATB. It becomes imperative for AATB to seek innovative structures that can leverage the capabilities of the existing member institutions of the AATB and offer appropriate risk mitigation tools to mobilize financial resources from external partners. To fill this gap, the AATB Board approved the establishment of an Arab African Guarantee Fund (AAGF).
The AAGF will serve to reduce premiums and the overall pricing charged by Guarantee/Insurance entities and provide first and second-loss coverage on transactions, thereby supporting investment flows to critical sectors leading to economic growth and development in the African continent.
ICIEC also signed an MoU with The African Export Import Bank (Afreximbank), the leading multilateral African trade finance institution, in March, whereby the two entities agreed to cooperate in promoting trade and investment flows between Arab and African countries and to boost support and information exchange to their businesses seeking regional market opportunities.
The MoU covers collaboration in risk-sharing and credit enhancement either on a bilateral basis or through the Co-Guarantee Platform for Africa (CGP) for trade and trade, enabling investment to/from Africa; in innovative structures such as Sukuk origination, Aviation Financing, Resilient Facilities and Climate Financing; ICIEC’s proposed provision of credit insurance to Afreximbank to cover its LC confirmation business through the issuance of a Documentary Credit Insurance Policy; the provision of credit enhancement to support Afreximbank syndications led by IsDB Group entities; and ICIEC partnering with AfrexInsure in underwriting and reinsurance and fronting arrangements.
ICIEC also promotes African trade and investment through its ordinary business operations, including lines of financing, insurance and Reinsurance cover and guarantees. In 2020, US$3,492 million (35.31% of the total) of Business Insured was directed to SSA/E member countries.
BL: The Arab Africa Guarantee Fund (AAGF), proposed by ICIEC, was approved by the AATB Board in March. Can you explain the importance of this initiative and how credit and political risk insurance (CPRI) solutions can boost trade finance and investment in your member countries?
Oussama Kaissi: The establishment of the Arab Africa Guarantee Fund (AAGF) is an important development in economic, trade and investment relations between the two regions. The Fund shall provide a scalable structure that aims to mobilize financial resources and risk mitigation capacity to support trade and investment in Arab and African countries; and ensure that all-in pricing of transactions is optimized for the end beneficiaries through blended structures.
We are grateful that the Board of Governors of the Arab Africa Trade Bridges (AATB) Program, at their meeting in Cairo in March 2022, approved a proposal by ICIEC, in its capacity as the Lead of the Insurance Pillar, for the establishment of such landmark Arab Africa Guarantee Fund.
The AATB Program led by the ITFC was launched by the IsDB, ITFC, ICIEC, OPEC Fund for International Development (OFID), Afreximbank, Arab Bank for Economic Development in Africa (BADEA), International Islamic Trade Finance Corporation (ITFC) and the Governments of Egypt, Morocco, Senegal and Tunisia to boost intra-Arab African trade and investment flows. Its potential is underpinned by the fact that ICIEC closed US$5.6 billion worth of transactions under the Program in the last 10 years, which is almost 9% of ICIEC business insured during the same period.
Credit and political risk insurance solutions can boost trade finance volume to meet the objectives of both ATTB and infrastructure investments. The needs of the Arab and the African countries are far more than the capabilities of the member institutions of AATB. It becomes imperative for AATB to seek innovative structures that can leverage the capabilities of the existing member institutions of the AATB and offer appropriate risk mitigation tools to mobilize financial resources from external partners. I am confident that the AAGF can help fill the above gaps in mobilizing financial resources and increasing risk mitigation capacity.
A technical team, led by ICIEC and comprising AATB partners, has started preparing a detailed business plan and Strategy for AAGF to be presented to the next Board of Governors meeting scheduled in Tunis in November 2022 for final approval. The AAGF is projected to start operations sometime in 2023.
The proposed Umbrella Fund comprises three sub-funds, including an Arab Africa Green Facility, an Arab Africa Food Security Facility and an Arab Africa Health Facility, which may attract additional partners interested in the respective sectors. In this respect, the AAGF Partners Network hopes to bring together AATB founding partners with other stakeholders, including National ECAs, PRI providers, Donors, MDBs, Regional Development Banks, NGOs and new AATB members.
The AAGF is benchmarked with other peer blended structures, such as the COVID-19 Emergency Response Initiative (ICERI) launched jointly by ICIEC and the Islamic Solidarity Fund for Development (ISFD), the poverty alleviation arm of the IsDB Group to support member countries in combatting the negative impact of the pandemic; The Africa Energy Guarantee Facility (AEGF) and The Africa Guarantee Fund (AGF). The ICERI program, according to the proposal, seems to be the most relevant in that it is a tried and tested model which can be replicated and expanded to the Arab Africa region.
BL: The IsDB and its Sister Entities are committed to helping Member States achieve the UN Sustainable Development Goals (SDGs) by 2030 and the just transition to clean air and Net Zero by 2050. How embedded are sustainable finance and Green Finance in ICIEC’s offerings?
Oussama Kaissi: Climate action investment and development opportunities are potentially huge, including reforestation, impact investing targeting SDG 13 (Climate Action) through Green Finance, especially Green Bonds and Sukuk, and investing in carbon capture technology and projects.
Sustainable finance and ESG are entrenched in Islamic financial institutions’ faith-based ethos and Development Finance Institutions. We adhere to the principles of Islam, not to exhaust nature but to preserve it; and deliver development and social impact so as not to leave people behind. The proscription of interest and usury is a defining sustainability factor, and an ESG Framework is a built-in characteristic of Islamic finance and insurance. The estimated US$3.4 trillion global Islamic finance industry is lagging in several respects. Most OIC member countries’ economies are dependent on commodities, including hydrocarbons. Achieving SDGs, including a just transition to clean energy, will be complicated and drawn out.
IsDB Group member states have considerable resources in clean energy, such as hydroelectric power and solar and wind energy. But they lack policy coordination, finance and investment for transformative change. The IsDB Group’s current renewable energy financing totals about US$3.4 billion, and ICIEC has provided US$470 million in insurance for renewable energy projects in member countries.
Supporting intra-OIC trade is a priority for ICIEC. Since its inception, it has supported a total of US$28bn in intra-OIC exports at the end of 2020. ICIEC catalyzes impact by supporting transactions and projects that contribute to the UN SDGs. Of the 17 goals, ICIEC is committed to 6 goals that are most related to its mandate. Our commitment to the SDGs is based on a Development Effectiveness Framework derived from a conceptual road map called Theory of Change, which links the Corporation’s services to intended outcomes in the export, sustainable investment, and financial sectors and is further underpinned by a Monitoring and Evaluation System.
The SDGs have been a central tenet of ICIEC’s operations since they were introduced in 2015. We believe that trade and investment facilitation is an effective vehicle to achieve the SDGs. We are committed to supporting sustainable development, investing and the SDGs. In this respect, ICIEC actively targets real impact and change in all its financing, insurance policies it underwrites and projects it supports and acts as a catalyst for private sector capital mobilization to be directed towards achieving the SDGs.
This requires that all stakeholders buy into the ESG and sustainable investment agenda in pandemic-related building back better and economic recovery and long-term financial, social, and economic development. Climate action investment and development opportunities are potentially tremendous, including reforestation, impact investing through Green Finance, especially Green Bonds and Sukuk, and investing in carbon capture technology and projects.
As a multilateral insurer, ICIEC and peer multilaterals have an essential role in contributing to the international climate finance ecosystem. It is committed to further boosting its green and sustainable finance operations. Regulators are adopting Green Finance Taxonomies and are rewriting the playbook for political and market demands that companies report their environmental and social impact.
Green Finance, Sustainability, ESG and SRI involve financing investments that generate benefits to the environment to achieve inclusive, resilient, and sustainable development. In 2021, a record US$1tn of green, social, and sustainable bonds were issued globally, and this trend is projected to increase in 2022. In contrast, total Green and Sustainable Sukuk reached US$15bn in 2021, led by sovereign and corporate issuers in Indonesia, Malaysia, and the GCC states. Sukuk remains the preferred format for ESG-linked debt in core Islamic finance markets.
Insurers are Green Economy enablers because they are also risk absorbers. Insurers are well placed to channel investment into infrastructure projects, such as renewable energy. Insurance solutions can reduce risks inherent in infrastructure projects and increase their attraction to investors, which presents a sizeable growth opportunity for the sector.
ICIECs insurance policies, whether the policyholder is a financial institution, specialized company, or contractor, that offer cover against political and commercial risks, can contribute to the flow of Climate Action-related investment, specialized technology and equipment or services into Member States.
ICIEC promotes a clean and just energy transition in the Member States by supporting renewable energy projects, waste management, desalination, and clean water provision, often involving private sector investment and bank financing. This is in line with the IsDB Group’s sustainable development strategy. These projects help reduce electricity imports, lessen dependency on fossil fuels, create jobs, support the local economy via local procurement of services and equipment, foster technology transfer, empower local people with new knowledge about renewable energy and improve local infrastructure via road construction and improvements in transmission lines and electricity distribution.
The investment and development impacts and delivery are demonstrated and contribute to the policy and socio-economic resilience required toward post-pandemic economic recovery and rebuilding. This is done through ICIEC’s unique Shariah-Compliant de-risking solutions, including the Non-Honouring of Sovereign Financial Obligations (NHSFO) Policy and Foreign Investment Insurance Policy (FIIP) cover Equity Investment and Reinsurance. This is achieved through forging Partnerships for Change in line with SDG 17 and ICIEC’s Theory of Change strategy, thus harnessing international best practices and technologies.
ICIEC recently participated in several Green Finance transactions in Turkey, the UAE, and Egypt involving NHSFO, FIIP, and Reinsurance cover totalling US$236.5 million for several solar, wind farm projects, waste-to-renewable energy, and water and sanitation sectors. ICIEC is well-positioned to play a critical role in private sector engagement through the credit enhancement its policies provide to financial institutions and its access to its Member States’ national and sub-national bodies, the custodians of the relevant Climate Action projects and transactions.
Looking ahead, the Corporation submitted a proposal to the Board of the Arab Africa Trade Bridges (ATTB) Program at its meeting in Cairo in March 2022 for the establishment of a landmark Climate Action Finance Trust Fund with institutional partners, peer multilaterals and ECAs in Member Sates and beyond, which would offer a discount to the insurance premiums needed for the financing of Climate Action projects in MCs that are not investment grade.
BL: Digitisation and Fintech are Proliferating Across the World in Various Sectors, Despite Regulation Still Lagging. Digital Exclusion, especially in Developing Countries. How important is Digitisation in Risk Mitigation and ICIEC’s Activities?
Oussama Kaissi: The COVID-19 pandemic has accelerated the global transition towards a digital economy, but uneven access to new technologies has already resulted in a digital divide and inequality. In many countries, the implementation of digital strategies remains at an embryonic stage.
The pandemic became a key driver in the digitization and automation of trade and post-trade services, which have proliferated in recent decades alongside the huge advances in Fintech. Harnessing digitalization for development through trade and investment must be a core ongoing objective for all stakeholders, especially governments, development agencies, export credit agencies, businesses and customers.
The Fintech revolution, including the application of Blockchain technology, is gaining momentum in the global marketplace, especially in asset facilitation and intermediation, trade services and payment solutions, thus opening up opportunities for banks, intermediaries and technology solution providers.
The IsDB Group, including ICIEC, has prioritized digitalization. At ICIEC, we are committed to investing more in supporting our member states’ efforts to narrow the digital divide between rich and developing countries and within states; and bridge the transition to a digital economy.
ICIEC uniquely is the only Shariah-Compliant multilateral export credit and investment insurer globally.
Thus, Shariah’s compliance with transaction structures, documentation, digitally automated processes, platforms, and connectivity is vital. This position is crucial in promoting the orderly development of the digital revolution and pre-empting a digital divide in the Islamic finance industry. Establishing digital infrastructure frameworks that can also support cross-border regulatory harmonization is vital for e-commerce and mitigating cybersecurity issues.
The encouraging signs are that several technology solutions providers have launched integrated service solutions and platforms for Shariah-compliant trading, risk management, capital, and money market operations, thus enhancing the digital footprint of their clients and counterparties.
These developments have enabled Islamic financial institutions to seek transactional flexibility to select and alternate the counterparties that they contract with for their trade requirements. The digitization of Murabaha transactions, for instance, has expedited obtaining financing and facilitating procedures to meet the urgent needs of clients. Digitization also enables the ESGs, SDGs and Sustainability considerations of parties to be embedded in the technology and system processes.
Our Strategic Risk Priorities over 2021-2024 include deployment of extensive digitalization of processes, reporting, quantitative modelling-monitoring tools, and Key Risk Indicators to flag emerging risks. The future of TradeTech and its impact on global trade and FDI flows will see transactions, encompassing digital security, transaction integrity, and digital LCs, become seamless at the insurer of the not-too-distant future.
The long-term outlook is for e-commerce exchanges connecting the entire trade ecosystem for paperless processing and financing. 3D printing and IP will become important business drivers.
Other issues in digital inclusion include critical cross-border risks associated with frontier technologies, which require global cooperation and coordination, notably in cyber-security and AML regulation, and technology transfers; the meagre internet penetration rates in developing countries; and the potential of digitization in enhancing financial inclusion by driving SME growth.
BL: What are the priorities for ICIEC over the next few years?
Oussama Kaissi: ICIEC priorities are to continue delivering on our mandate of facilitating intra-OIC trade and member states’ trade through the provision of risk management solutions such as credit and investment insurance, Reinsurance and guarantees; and to continue supporting promoting the Islamic finance and insurance industry.
In addition, our priorities going forward include the delivery of development impact, the development of value-based partnerships, and enabling excellence in both our staff and industry. In times of extreme global economic and geopolitical volatility and challenges, we reaffirm our strong support to the Member states.
Like many peer development institutions, we acknowledge that the post-pandemic recovery will continue in 2022, although any rebound and pace of recovery across different regions will vary sharply between our Member States. This uneven divergence in economic prospects across countries remains a significant concern for collaboration on global challenges, including in our Member States. These economic divergences and disparities remain beholden to vaccine inequality, vaccine access and the percentage of populations vaccinated against the virus. The latest WHO data reveals that only 12 Member States have administrated full vaccination on over 60% of their populations.
Global trade, tourism, remittances flow, and volatile oil prices have sharply impacted the Member States. Slow progress in vaccine rollout and the emergence of COVID variants in the several Member States manifest a weaker recovery than anticipated, high unemployment, supply-chain disruptions, domestic political conflicts, and rising poverty. Tackling rising poverty is a prerequisite for achieving sustainable social and economic development.
ICIEC projects five key megatrends impacting global trade over the next year. These include mitigating the ongoing impact of the pandemic on trade, the challenges relating to climate change, the steep rise in inequality, global geopolitical tensions, and the rising role of technology, especially digitization in the trade ecosystem.
