Food security in a fragile world has come starkly to the fore as an issue given the backdrop of conflict in Ukraine, recent natural disasters, climate change, and the impact on access to vital agricultural products and food. Here we look at the initiatives ICIEC has been supporting, the partnerships made, and the impact they can have in improving food security and underpinning the development of more resilient access to food.
The global food security crisis is having a particular impact on many OIC member states, and ICIEC is ready to address the challenges its member states face. Food security has always been one of ICIEC’s core objectives in its singular position as the world’s only Shariah-Compliant trade and investment insurer catering to the needs of its member states in the Islamic world.
The second of the United Nations’ 17 Sustainable Development Goals (SDG2) is to end hunger, achieve food security and improved nutrition, and promote sustainable agriculture. By the UN’s admission, the world is not on track to achieve SDG2 by 2030, and the Organization has asserted that a ‘profound change’ is needed in the global food and agricultural system to stand a chance of reaching the goal.
In the Food and Agriculture (FAO) of the UN, the data is stark. Chronic undernourishment is a burden for more than three-quarters of a billion people worldwide, and according to the World Bank data from 2020, at a time before the COVID pandemic had unrolled, the Middle East and North Africa (MENA’s) share of the world’s acutely food insecure people was 20%, disproportionately high compared to its 6% share of the global population. The combination of geopolitical tensions, the war in Ukraine, the aftermath of the COVID pandemic, high energy prices, and a slew of natural disasters and climate issues have all combined to increase food insecurity and commodity price pressures for countries that have had to import many vital agricultural goods.
ICIEC’s response is also part of a global context and can be set amid the backdrop of the UN’s Global Crisis Response Group on Food, Energy, and Finance (GCRG), which was set up in March 2022, and the Islamic Development Bank Group’s comprehensive Food Security Response Program (FSRP), launched last July. GCRG allows the UN Secretariat to coordinate the global response to the worldwide impacts of the war in Ukraine on global food, energy, and finance systems.
The IsDB Group’s contribution is a US$10.54 billion comprehensive FSRP package supporting member states, including 27 in Africa, in addressing the food security crisis. In that program, ICIEC has the potential to provide US$500 million in Credit and Political Risk Insurance (CPRI) coverage.
In all, IsDB Group backs total financing support of over US$20.6 billion for agriculture and food security in 1,538 operations – and its ‘One Group One Goal’ approach enables all areas of food security to be covered cohesively throughout the group.
ICIEC’s role in the routes to ensure food security
There are many different routes to ensuring food security – and one key track is to help provide the crucial infrastructure that underpins a country’s ability to transform its resources. Supporting the agricultural sector in member states to help improve food security and help end hunger has been a critical tenet of ICIEC’s endeavors.
Since it was established in 1994, ICIEC has supported more than US$ 1.5 billion in the agricultural sector, which has helped improve the incomes of farmers and food producers, particularly in the least developed member countries (LDMCs).
Regarding projects that underpin SDG 2, ICIEC has stood firmly on both sides of insuring the trade and investment needs of the agriculture sector in member states. In practical terms, that means providing comprehensive protection for exporters of agricultural goods, technologies, and equipment. That support allows exporters to sell goods into riskier countries and helps support their cashflows and potential operational risks.
Indeed, ICIEC’s CPRI for agricultural machinery exporters means the companies can export to more risky countries, which has the knockon effect of allowing governments and companies in those riskier countries access to more productive assets. This bridges the gap that enables countries to develop their local food market productivity and, for instance, ultimately helps them become less reliant on expensive imports.
For instance, in 2022, Komatsu, one of the world’s largest manufacturers of agricultural Machinery, was able to export vital agricultural equipment to Turkmenistan from Japan as a result of a US$40 million insurance policy issued to ING Bank (Tokyo branch). The cover to mitigate non-payment risk comes under the Non-Honouring of Sovereign Financial Obligations for the extended financing facility to the Government of Turkmenistan through the State Bank for Foreign Economic Affairs.
ICIEC in the FRSP – a mandate to 2025 that’s already ahead of the target
The FRSP program will reach through 2025 and is principally focused on working on cuttingedge interventions to address structural weaknesses and root causes of food insecurity in the medium and long term. Common themes need to be addressed, including low productivity, rural poverty, and lack of resilience in regional and national agricultural food systems. The six primary initiatives being undertaken are:
- Building agricultural resilience to climate change
- Food and input supply value chains
- Improving market access and productivity for smallholders
- Supporting rural livelihoods
- Developing livestock and fisheries
- Building resilient food supply systems.
Within the FRSP, which spans to December 2025, ICIEC’s contribution of US$500 million in insurance capacity is being made through the extension of CPRI solutions to facilitate international trade transactions (food, seeds, fertilizers, and equipment related to agriculture projects) and foreign investment in the agriculture sector aiming at increasing the production and improving the storage capacity of, and resilience in member states under the initiatives on building food and input supply value chains.
In practice, ICIEC has been facilitating banking transactions in its member states to help with imports of agricultural equipment, fertilizers, sugar, wheat, other grains, soya beans, and canola. It has also been supporting investments to improve the modernization of the agricultural sector in member states.
By the end of the first quarter of this year, total approvals under the program relating to food security had already reached US$301 million, up dramatically from the total approvals that had already reached US$159 million at the end of December.
Who can access ICIEC interventions? In short, importers, contractors, investors, and financial institutions for member states. The main focus is on the Least Developed Member Countries (LDMCs), and beneficiaries come from all geographies, including Sub-Saharan Africa, Asia, and MENA.
The countries receiving approved support under FRSP by the end of March 2023 include Egypt, Uzbekistan, Uganda, Senegal, Bangladesh, and Indonesia.
ICIEC is also mobilizing external financial resources to get member states to benefit from its international reinsurance partnerships. This reinsurance support is possible through short, medium, and long-term portfolio-based treaties and facultative arrangements on automatic facility or a single transaction basis.
Building on the lessons learned during the COVID crisis
Under the Strategic Preparedness Response Program (SPRP) developed during the pandemic, ICIEC helped advance US$169 million to the food sector in 15 member states. The SPRP was designed in three parts (the three Rs) – to respond, restore and restart member states’ economies during and after the crisis and deliver immediate and long-term support for resiliency.
In the broader context, from US$514 million of approvals in 2020, the first year of the SPRP, ICIEC reached US$1.4 billion by the end of December 2022, nearly ten times the initially pledged amount of $150 million. This total applied to 46 transactions and projects in favor of 15 member states.
It also included US$271 million under the ICIEC ISFD COVID-19 Emergency Response Initiative (ICERI) program in cooperation with the Islamic Solidarity Fund for Development (ISFD). Discussion is progressing to expand the reach of the structures used under ICERI to use under FRSP and to help support more significant deals with longer tenors.
Putting partnerships on food security into practice
Ensuring and improving food security is a delicate topic and necessitates wide arms around deep partnerships to make it happen in practice. ICIEC emphasizes its outreach to public and private sector bodies through relationships with other multilaterals and industry bodies and direct contact with companies internationally.
ICIEC has signed Memorandums of Understanding and Strategic Partnership Agreements with the Islamic Organisation for Food Security (IOFS) and its specialist subsidiary, the Islamic Food Processing Association. ICIEC has been collaborating on food security enhancement since signing an extensive MoU two years ago with IOFS [See also the profile interview with IOFS Director General, HE Professor Baidaulet].
ICIEC also signed an MoU in 2022 with the Islamic Chamber of Commerce and Industry (ICCIA), an affiliated institution of the OIC and the umbrella body for the private sector in the 57 Islamic member states. Cooperation will be broad and includes helping the development of the Halal industry worldwide.
These arrangements allow for the sharing of ideas and specific cooperation in attracting and promoting foreign investment in agribusiness and food security as well as in the technical and financial infrastructure, such as due diligence, KYC, and credit search documentation.
Other notable MoUs with private companies in 2022 include that with Al-Rajhi International Investment Company (RAII), a subsidiary of Sulaiman Abdulaziz Al-Rajhi Awqaf Holding. This is one of the largest business groups in Saudi Arabia, with core activities including investments in the food and agricultural sectors, both domestic and international. The company owns the biggest organic agricultural project in Saudi Arabia and an integrated poultry project in Egypt, and it exports its products to neighboring GCC countries, Yemen, China, and Vietnam.
[For further information on ICIEC’s role in helping improve food security, see the interview with our team member Lotfi Zairi, the lead underwriter of operations for sovereign risks in the underwriting operations department at ICIEC]
