SPOTLIGHT
OPEC Fund Private Sector spearheads new products
Local currency lending, Islamic finance policy, new syndications projects – and more to come
A lbert Einstein said: “Life is like riding a bicycle. To keep your balance, you must keep moving.” Driven by the ambition to innovate, modernize and explore new approaches, the OPEC Fund Private Sector department has made this maxim one of its leitmotifs. The introduction of new products is constantly expanding the toolbox and the Private Sector’s ability to meet growing demand for its services. Islamic financing The latest step in this process has been the OPEC Fund Governing Board’s approval of a new policy on Islamic financing in September 2026, establishing a framework to offer Sharia-compliant instruments alongside conventional finance to private sector clients. While the OPEC Fund has offered Islamic finance products for some years, the new policy will allow the institution to provide clients with greater flexibility and act as a bridge between different sources of development finance. Islamic finance is a system of financial transactions and investments that complies with Sharia principles. It prohibits interest-based lending (riba) and investment in sectors considered unethical, while emphasizing risk- sharing, transparency and asset-backed financing. All financial activities must be linked to real economic activity, ensuring that finance supports productive and sustainable growth. Instead of interest, financiers earn returns through asset-backed transactions or by sharing in the profits generated by the underlying investment. This ensures that financing is connected to real economic activity. Islamic finance transactions are reviewed by qualified Sharia scholars or Sharia boards, which
local currency loan in June 2026. The OPEC Fund’s US$20 million-equivalent facility to Bank Respublika puts long- term Azerbaijani manat funding in the hands of local small and medium-sized enterprises (SMEs), the backbone of the country’s economy. It tackles one of the most persistent barriers to growth in emerging markets, the currency mismatch. SMEs earn in local currency, but local banks often fund their balance sheet in hard currencies, creating currency risks that have to be allocated. Either borrowers carry exchange-rate exposure they cannot hedge, or banks hold it on their balance sheets and ration credit accordingly, where a single devaluation can turn a healthy business into a distressed one overnight. If local banks fund themselves in hard currencies, such as US dollars or Euro, they have to pass this foreign exchange risk to borrowers, usually shifting that burden via high interest rates. Providing local currency funding resolves the issue by allowing banks to lend in the same currency that businesses earn their income. Lenders like the OPEC Fund make this possible with the creation of a synthetic local currency facility where they hedge their local currency position through a specialized partner. On this basis, they disburse loans and receive funds in hard currencies, while borrowers only have local currency exposures. The cost of this hedge is ultimately borne by the client, but the removal of the local currency risk is usually worth more than the cost. Although the concept of local currency lending is well-established, appetite for the OPEC Fund’s offering is high. “There are vast opportunities out there. We can see demand for local currency lending
“We see significant opportunities to mobilize capital through Islamic finance syndications and co-financing partnerships.”
Baret Gurden, Investment Manager, OPEC Fund
assess the financing structure and issue an opinion confirming its compliance with Sharia principles. So far in 2026, the OPEC Fund has approved two Sharia-compliant projects. Demand is strong and “in addition to our own direct financing, we see significant opportunities to mobilize capital through Islamic finance syndications and co-financing partnerships,” said Investment Manager Baret Gurden. Local currency lending Another milestone was reached with the signing of the OPEC Fund’s first
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