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Monday, December 5, 2022

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Tarfin’s Sukuk: A first for Turkey’s agri sector

Agritech platform Tarfin, which offers flexible financing solutions to farmers through a point-of-sale network, has issued its first-ever Sukuk facility, which is also a landmark transaction for the agri sector of Turkey. NESSREEN TAMANO has the details.

The fintech company, through an SPV, Kalkinma Yatirim Varlik Kiralama (Development and Investment Asset Leasing Company), issued a Sukuk Wakalah facility worth TRY40 million (US$2.25 million), carrying a tenor of 61 days and a profit rate of 32%.

Proceeds from the Sukuk issuance will be used to finance underserved farmers’ purchases of agri inputs, as well as finance Tarfin’s crop offtake activities and business-to-business inventory consignment solutions.

“Tarfin’s first Sukuk issuance was oversubscribed on the back of strong demand from institutional investors looking for both returns in line with the principles of Islamic finance as well as a socially responsible investment thesis,” Mehmet Memecan, the founder and CEO of Tarfin, told IFN.

Founded in 2017, Tarfin has since financed the sale of over US$110 million-worth of agri inputs to cover the needs of over 45,000 farmers in Turkey and Romania. The company’s recent Sukuk issuance has helped create an end-to-end Shariah compliant agri supply chain financing solution for farmers and investors interested in Islamic financial products — also a first in the country.

The debut issuance was challenging, noted Mehmet, as it was the first time the company was structuring an Islamic facility, but Tarfin’s collaboration with financial advisor Development and Investment Bank of Turkiye and lead arranger Ziraat Securities proved valuable and helpful for the team.

The issuing SPV was established by Development and Investment Bank of Turkiye to issue Sukuk, based on the Capital Markets Law in Turkey that only allows private sector Sukuk issuances to be made through a bank or regulated entity permitted to issue a Sukuk paper, Mehmet explained.

Tarfin plans to close another Islamic issuance soon. “We plan to create a structured Sukuk issuance program that matches the seasonal needs of our farmer customers. We expect to issue our second Sukuk in September. We will be using the funds raised to supply and finance farmers for their fertilizers, seeds and diesel needs for winter wheat and barley planting,” Mehmet shared.

Tarfin’s Sukuk TRY40 million (US$2.25 million) 7th July 2022
Issuer Kalkinma Yatirim Varlik Kiralama (Development and Investment Asset Leasing Company)
Obligor Tarfin
Structure Wakalah
Use of proceeds To finance sales of agricultural inputs to farmers, and fund crop offtake and inventory consignment operations
Mode of issue Private
Tenor 61 days
Maturity date 6th September 2022
Profit rate 32%
Payment terms Single payment at maturity
Lead arranger Ziraat Yatirim Menkul Degerler (Ziraat Securities)
Financial advisor Turkiye Kalkinma ve Yatirim Bankasi (Development and Investment Bank of Turkiye)
Legal advisor Ozmen Yalcin Law
Currency Turkish lira
Governing law Turkish Law
Shariah advisor ISFA – Islami Finans Danismanlik
Investor breakdown 100% institutional investors
Listing Borsa Istanbul (Istanbul Stock Exchange)
Tradability Yes

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