Brazil’s First Islamic Loan to Fatten Cattle as Trade GrowsYudith Ho
Brazil’s first Shariah-compliant livestock lending program has been set up by Abu Dhabi Equity Partners and will fund cattle farming, as trade grows between the nation and Middle Eastern countries.
ADEP, a boutique investment bank based in Cayman Islands, has started the financing with $25 million to be used for fattening 70,000 cattle, held by ranch operators in Goias and Sao Paulo states, it said in a statement released today. White & Case LLP, Macquarie Group Ltd. and Swiss Re AG assisted with the deal, according to the statement.
Trade between Brazil and Arab countries reached $25.9 billion in 2012, from $5 billion in 2002, with Latin America’s largest economy exporting sugar, meat and grain, while importing fuel from the Middle East, according to the Arab-Brazilian Chamber of Commerce. Countries from Hong Kong to Morocco are revising laws to tap Islamic financial assets, which expanded 18 percent annually in the last four years to exceed $1.7 trillion in 2013, according to Ernst & Young LLP.
“Shariah-compliant funding of the growing multibillion dollar halal food industry is a natural yet untapped market segment,” Muneef O. Tarmoom, Abu Dhabi-based managing partner at ADEP, said in the statement. “Strategically positioned Islamic financial institutions in the Mid-East and beyond stand to gain substantially from such ‘South-South’ trade corridor in the next two decades.”
The financing was arranged using Wakalah and Murabaha structures, which means ADEP and the ranches will pay returns using the profit generated by cattle sales to comply with the religion’s ban against interest. There’s more than $100 million worth of cattle- and sugarcane-based Shariah-compliant transactions in the pipeline this year, ADEP Managing Partner Juan Fernando Valdivieso said in the statement.