Companies can obtain short-term liquidity via the sale of current assets such as receivables and inventories to financial institutions without increasing their indebtedness. The structuring of such solutions however, entails new sets of risks to financial institutions. In contrast to debt financing, the financier is exposed to risks beyond credit, such as inventory and market risk, which calls for additional safeguards for risk mitigation, different approaches to risk management, infrastructure and practices. Given the nature of the exposures, this warrants Islamic financial institutions (IFIs) to take an exploratory approach to new trade-based offerings. This allows for a better understanding of the risks and their dynamics thus enabling IFIs to put in place the appropriate framework and policies. As an example, four Islamic banks have commenced a pilot programme with four government ministries in March 2021 to provide liquidity facilities for SMEs via the purchase of outstanding invoices from Government vendors. This is an example where non-traditional Islamic trade finance solutions can help satisfy the financial needs of businesses. Another important thrust is for us and in particular Islamic finance to help businesses embrace sustainability and build resilience to climate change. The urgent need for an inclusive and greener recovery is undeniable. This is a point driven home by the recent publication of the Intergovernmental Panel on Climate Change report that spelt out code red for humanity. On the current trajectory, climate change is estimated to cost the world USD1.7 trillion a year by 2050, with potential escalation to approximately USD30 trillion by 20753.
“Carbon Dated: Multinational companies planning to cut suppliers by 2025 for failing to curb carbon emissions”. 5 Source: MITI (April 2021). “Investment Policy Reforms to be rooted in the National Investment Aspirations (NIA)”,  Media Release and MIDA (May, 2021). “Malaysia is shifting gears: National Investment Aspirations (NIA). eNewsletter. 6 Source: Musnad Ahmad, ar-Risalah issuance, page number: 502/ 28, hadith number 17265. 4/4  BIS central bankers' speeches