The ongoing uniqueness and success of Islamic finance will depend heavily upon the principled creativity of market players. They need to have a vision, keeping close to fundamental principles, which will push the industry forward. Recipco offers such a vision through the Universal Trading Unit and the Recipco Capacity Exchange. These products have a real chance to alter the way we exchange, creating a more fair and equitable financial system.
Recipco is a private enterprise that advocates private-public sector collaboration to advance innovation in economic theory and practice. It is the architect of a new capacity trading exchange (the Recipco Capacity Exchange) designed to improve economic and social conditions worldwide.
The exchange serves as an international marketplace and trade facilitator using a special purpose global currency, based on rigorous and accepted economic modelling, and backed in ways designed to inspire trust and confidence while contributing to a more inclusive, fair and just economy and one that is in keeping with Shari’a principals of Islamic finance.
This article introduces Recipco’s innovative economic and business proposition, the Recipco Capacity Exchange, and examines its relevance to the unsettled conditions of North Africa and the Middle East and more broadly with the global Islamic community and in relation to Islamic finance. Recipco Capacity Exchange and Universal Trading Unit
The Recipco Capacity Exchange is at the core of the new economic architecture Recipco is introducing. It is a transaction mechanism for trade discovery and settlement that allows organizations to profit by creating value from their unused and available capacity. It is a non-cash trading platform that uses a Universal Trading Unit or UTU™ as the medium of exchange. The UTU™, another key component of Recipco’s new economic architecture, is an independently administered, non-sovereign credit supply valued on the basis of trade flow between those participating in the exchange. This trading currency can be used at any time to purchase capacity from others on the exchange. It is a system impervious to unpredictable monetary policies, exchange rate fluctuations or other constraints of the current eco- nomic system. Although initially introduced to facilitate inter-party trade of abundant and unused capacity between large well-respected organizations that bring trust and liquidity, it is equally applicable to all commercial and non-profit organizations without regard to size, geography or credit status. This alternative market mechanism improves efficiency in the trading of such capacities bringing participants increased sales, and
new sources of working capital and reducingan organization’s dependence on traditional cash and credit.
While there are a myriad of existing trade and exchange mechanisms (such as barter exchanges and countertrade agencies) to address the limitation of cash and credit, each of these are, for the most part, cumbersome, risky and usually costly and inefficient. The effective trading of such capacities through the Recipco Capacity Exchange is designed to address such risks and inefficiencies and invoke trust and confidence, resulting in a more efficient and practical use of resources.
Timing for the introduction of Recipco’s alternative market solution has never been more necessary, in large part due to the recent global economic crisis and the evident dangers of the world’s current financial architecture.
Recipco’s economic solution, including the Recipco Capacity Exchange, is a result of years of extensive research and development involving a team of notable economists, important public figures and leading experts from financial markets and business. It is a paradigm-shifting eco-nomic architecture with enormous potential to improve economic and social conditions.
Recipco has spent several years building relationships with an extraordinary community of global stakeholders – thought leaders, businesses, and governments- that bring their varied expertise and add credibility and trust to this innovative approach to introducing a more inclusive, fair and just global economic architecture. The Company is preparing to operate and scale the enterprise on a global basis and is bringing in key and relevant stakeholders to engage in the practical introduction of this new economic thinking that will improve economic and social conditions globally.
In addition to its global headquarters in the UK, Recipco has subsidiaries in North America and in China. The Company firmly believes there exists an additional opportunity for expansion in the Middle East and particularly given the relevance of Recipco’s economic architecture to the broader Global Islamic Community.
Shari’a compliant
Islam is the world’s second-largest religion, its followers comprising approximately 23% of the world’s population. The majority of the Islamic community resides in the Middle East, Africa and Asia; the Islamic community is geographically diverse and consists of both developed and emerging countries. Not surprisingly, Shari’a compliant finance is a segment of modern finance that is growing among many banks and investment houses, due in part to investors eager to work with the Middle East as oil prices continue to increase, but also because the modern banking world recognizes the significance of this market. West- ern financial services firms are beginning to offer Shari’a-compliant investment vehicles that neither pay interest, nor benefit from gambling.
Islamic finance, in its current form, focuses primarily on providing alternatives to the conventional interest-based financial products by offering solutions that do not involve interest, but rather are based on more equitable and just modes such as rent, equity and trade. However, a critical aspect not adequately addressed by Islamic finance currently and a matter of concern for several Islamic finance scholars, is that the existing basic unit of exchange of value, i.e. sovereign currencies, are themselves not issued in a way that would be considered truly Shari’a compliant. At present, there is no formal financial basis of their issuance, with no backing by actual assets. The existing currencies are generally backed by government debt, which in itself is issued through interest-bearing instruments.
Recipco has a very unique and compelling approach to this critical matter. The UTU™ addresses this core issue as its issuance is based directly on the actual ability of the Capacity Exchange members to produce goods and services – which in fact is the true concept of ethical money issuance. Furthermore, UTU™s do not earn any interest and their utility is only when they are utilized for actual trades, thereby encouraging UTU™ owners to spend their ‘money’ for value-added economic activity as opposed to hoarding it as capital to earn interest – a concept that is very much in line and encouraged by Islamic principles. By turning capacity into working capital, the Recipco Capacity Exchange and its Universal Trading Unit create many potential social and economic benefits for the Islamic community. In addition to encouraging a more level playing field for global trade, the Recipco solution has the potential to increase working capital available to Islamic organizations by mobilizing unused capacity to create a new source of credit that is not reliant on traditional interest-bearing forms of capital.
In summary, the nature of the UTU™ as an alternative to cash for lending, borrowing and the exchange of value is more in accordance with basic Islamic principles that prohibit the fixed or floating payment or acceptance of specific interest or fees.
Recipco’s Relevance to the Unsettled Conditions of the Middle East Many Islamic countries is currently facing significant political and economic turmoil. The turmoil itself is uneven much greater and far-reaching in some countries than in others. Thus, too, the eco- nomic impact of varying political instabilities is uneven and raises questions around trade and capital movement as well as negative effects on currency. Unrest tends to create risk while uncertainty leads to hoarding and pulling back from the market; both lead to higher interest rates and constriction of credit. In these circum- stances, trading on the Recipco Capacity Exchange facilitates multilateral trade and avoids the dangers of currency revaluation. The efficient trading of such capacities through alternative non-cash or other mechanisms of exchange would provide new sources of working capital, resulting in a more efficient use of resources and contribute to the growth of global and local economies, in particular in unsettled countries. The provision of an exchange of value based on the economic underpinning of the actual and intrinsic value of the products and services traded greatly reduces friction and risks inherent in the international monetary system and links more directly to the real economy, reducing potential negative impacts of speculation.
Bringing emerging Islamic markets into the global financial economy For emerging and developing Islamic nations, as long as tradable capacity is available, economic growth and development can be funded without being constrained by limitations in trade financing or other sources of traditional cash or credit. According to the International Labor Organization, “creating buying power is the first priority among strategies for the emerging market economies…to truly break the vicious cycle of poverty, isolation and economic exclusion”. By introducing a Shari’a-compliant medium of exchange that is not encumbered by the in- efficiencies, risks and volatility of the current global monetary system, Recipco can help to bring those countries within the Islamic community that are underserved by the current financial system into the eco- nomic forefront. By allowing a mechanism through which to trade available and un- used capacity, Recipco offers a means for these emerging Islamic economies to in- crease self-sufficiency, reduce poverty, and become stronger participants in both the global Islamic community and the world economy. The Recipco solution, and in particular its Universal Trading Unit (UTU™), addresses many of the systemic issues in the global economy that prejudice these poorer nations (who have little or no access to current forms of cash and credit, and whose own sovereign currencies have limited global credibility, liquidity and are burdened with extraordinary debt). Simply put, the UTU™ serves as a new source of both liquidity and credit that is not limited by traditional sovereign currency constraints of national debt, government policies and foreign exchange market volatility.
It should be noted that not only does the Recipco solution help to bring emerging and developing Islamic nations into the global economy, it also works in reverse by providing a mechanism for Islamic corporations and governments al- ready operating in the current global economy, to realize new and incremental market opportunities for trade and commerce with these emerging and developing nations who can mobilize their immense capacity into new purchasing power through Recipco.
Conclusion
In conclusion, Recipco offers a Shari’a-compliant means by which to efficiently mobilize and increase capacity and working capital within the Islamic community that is non-reliant on traditional interest-bearing instruments and credit facilities.
The Recipco Capacity Exchange is a new alternative for global trade that utilizes existing capacity to generate new sources of working capital, increase transaction transparency, stimulate employment, and improve market efficiency. As such it has the potential to encourage sustainable growth in both emerging and mature markets while putting both on more equal footing and less subject to the volatility of financial markets.
Recipco’s mission is to create a global economic architecture for the exchange of value that is fairer and equitable, based on the actual economic value of products and services without the risks of speculation or other inefficiencies associated with the global monetary system of sovereign fiat currencies.
This architecture can create significant, positive social and economic impact by increasing the alternatives for participation in today’s global economy and in particular providing a viable alternative to conventional interest-based finance that can play an instrumental role within the Islamic community.
