Islamic Finance Daily Brief — Monday, October 26, 2026
Assalamu alaikum! Today's Islamic finance stories — and what to learn from them.
Today's stories
🌍 1. Islamic finance moves into the trade that suppliers wait on
The International Islamic Trade Finance Corporation has provided more than $13 billion in open account financing since 2024, and it runs an advisory service that helps banks and technology platforms set up Shariah-compliant supply chain finance products. In Jordan, it reviewed a commercial bank's receivables product, proposed structural changes, and arranged certification through a member of the Islamic Development Bank group's Shariah board. In the Maldives, a product that turns receivables from tourism and fisheries into cash is at implementation stage. In February 2026, it helped the Greek technology company Qualco get its ProximaPlus platform certified to process transactions using Goods Murabaha and Tawarruq structures.
What to learn: Open account trade is the everyday arrangement where a supplier ships goods and gets paid later, after the buyer receives them. The gap between shipping and payment is the problem. A small supplier who has delivered stock still needs cash to pay workers and buy the next batch of materials, and waiting 60 or 90 days for the buyer to pay can stall the business. Supply chain finance closes that gap. A financier pays the supplier early, at a small discount, and collects the full amount from the buyer on the due date. The supplier gets cash now. The buyer still pays later.
The Shariah question is how the financier earns its return. A conventional receivables deal earns interest on money advanced, and it trades a debt for less than its face value. ITFC's advisers say that conflicts with two principles: no profit from the exchange of money, and no excessive uncertainty over whether the receivable will be collected. The structures it certifies avoid both. Murabaha was covered as a concept in the Oct 8 edition. In this setting, the financier buys goods and sells them on at a disclosed markup instead of lending cash. Tawarruq is a related chain of sales. A person buys a commodity on deferred payment, sells it on for cash, and keeps the cash. The cash comes from a real sale of a real commodity, and each sale in the chain is a separate contract.
The work ITFC does with each bank has four steps: checking whether the bank is ready, designing the product, setting up Shariah governance and documents, and training staff. Where the bank qualifies, it can then draw on ITFC financing lines. In the USA, a supplier in the same position usually turns to conventional factoring or a bank receivables facility. A Shariah-compliant version of that facility is not a standard product at US banks, so the Jordan and Maldives work shows what the product looks like when a bank builds it from the start.
🔗 Source: Trade Treasury Payments
🌍 2. Postal networks carry Islamic finance to small businesses
The Islamic Development Bank Institute and the Universal Postal Union have launched Prosper MSMEs, a project that explores how national postal networks can widen access to e-commerce and deliver Islamic finance-aligned digital financial services to micro, small, and medium-sized enterprises and underserved communities. The agreement was signed on September 21 and announced on October 13. The project will run in two phases across eight selected member countries. The first phase examines the rules governing e-commerce, postal services, digital payments, and Islamic finance in each participating country.
What to learn: A postal network is the branch system a country already owns. Post offices reach villages and small towns where commercial banks have no branch, and the postman is often the most regular visitor a small shopkeeper sees. Prosper MSMEs starts from that reach. A small business that sells online needs three things: a way to take payments, a way to ship goods, and a way to borrow for stock. A postal operator can sit in the middle of all three, because it already handles parcels and cash. The project asks what rules have to change for a postal operator to offer Shariah-compliant payment and financing services alongside its delivery work, and what products fit a small business that has no bank relationship.
The first phase is a regulatory assessment, which means the project studies each country's rules before any product launches. That order matters. A payment service needs a licence, a financing product needs a Shariah board, and a cross-border sale needs customs and tax rules that match. For a shopkeeper in a town with one post office and no bank branch, the outcome could be a single counter where she sends a parcel, takes a payment, and arranges stock financing that follows Islamic rules. In the USA, the Postal Service does not offer Islamic finance, and a small business in the same position goes to a bank or a fintech lender. The postal route is a different answer to the same gap: use the network that already reaches everyone.
🔗 Source: Tripura Star News
Learn
Factoring: turning unpaid invoices into cash
Factoring is the sale of unpaid invoices for cash now. A business that has delivered goods and issued an invoice does not wait 30, 60, or 90 days for the customer to pay. It sells the invoice to a factoring company, called a factor, at a discount. The factor pays most of the invoice value within a day or two, and collects the full amount from the customer on the due date.
The numbers work like this. A business invoices a customer $10,000 on 60-day terms. A factor advances 85%, which is $8,500, and holds 15%, which is $1,500, as a reserve. When the customer pays the full $10,000, the factor releases the reserve minus its fee. Advance rates usually run from 70% to 95% of the invoice value, and the fee is commonly 1% to 3% of the invoice value. The factor checks the customer's credit before buying, because the factor is betting on the customer paying, not on the seller surviving.
There are two ways to split the risk. In recourse factoring, the seller must buy the invoice back if the customer does not pay, and the fee is lower. In non-recourse factoring, the factor absorbs the loss if the customer becomes insolvent, and the fee is higher. Non-recourse cover usually excludes disputes over the goods and fraud. A business can also choose spot factoring, selling single invoices when it needs cash, or a contract that covers most or all of its invoices for lower rates.
In the USA, factoring is a large industry, valued at about $172 billion in 2024. It is common in trucking, staffing, and manufacturing, where small suppliers carry long payment terms from large buyers. A factor usually files a public notice, called a UCC-1, on the seller's receivables, and the customer is told to pay the factor directly. The factor underwrites the buyer's credit, so a young business with a strong customer can get funded even when a bank turns it down.
In Europe, factoring is the most developed market in the world. Germany alone processes over €280 billion a year, and France, Italy, Spain, and the Nordic countries all have established markets. About half of European volume is non-recourse, because cross-border deals need credit protection. In the UK, 6.9 million invoices were factored in 2023, through banks and independent factors. In Australia, the service is called debtor finance. Advance rates run from 70% to 90%, and the largest non-bank provider is ScotPac, alongside banks such as NAB and CBA and selective providers such as OptiPay and Skippr. In Canada, bank-led and specialist providers serve exporters, distributors, and manufacturers, with government programmes supporting small business and export trade finance.
The Shariah difference is in what is sold. Conventional factoring buys a debt at a discount and earns from that discount. That conflicts with the principles behind today's first story: no profit from the exchange of money, and no trading a debt for less than its face value. A Shariah-compliant version cannot simply buy the invoice at a discount. That is why ITFC's structures route the return through a real sale of goods, using murabaha or tawarruq, instead of buying the receivable itself.
All sources
- Trade Treasury Payments — ITFC puts Islamic finance behind open account trade (Oct 26, 2026)
- Tripura Star News — Islamic Development Bank Institute and Universal Postal Union launch Prosper MSMEs (Oct 13, 2026)
- Merchant Maverick — Invoice factoring guide: how it works, advance rates, recourse vs non-recourse
- Ramp — What invoice factoring is and how it works, including the US market size
- Emergen Research — Invoice factoring market: Europe, Germany, and Canada
- Smart SMS Solutions — Invoice factoring companies in Australia: advance rates and providers