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rivate lender Bank Danamon expects to grow its trade finance this year by boosting its sharia financing amid weakening demand for global commodities.

Danamon trade product management head Margaret Tjahjono said the lender was aiming to grow its trade finance to Rp 12 trillion (US$961.54 million) this year, an increase of 20 percent from around Rp 10 trillion last year.

The expectation is based on a calculation following the bank'€™s cooperation agreement to channel funds of $200 million from the International Islamic Trade Finance Corporation (ITFC), part of the Islamic Development Bank (IDB) Group, to Danamon'€™s trade customers.

The ITFC has appointed Danamon as its agent to arrange financing for customers, as well as to provide trade finance services and trade collateral management.

'€œThe agreement with ITFC will help our total trade finance reach at least Rp 12 trillion this year. On the other hand, the conventional side of our trade finance will only grow 10 percent without the sharia contribution,'€ she said Thursday.

Margaret said the weakening of the global economy, as well as low margins, had affected the prospects for conventional trade finance, leading the bank to take a '€œwait-and-see'€ stance.

She said several main commodities, such as coal, had seen a slump in the global price, which had affected the trade business, even though there was the positive effect of the rupiah'€™s depreciation on the country'€™s exports.

Aside from that, Margaret said the bank saw promising growth in the food and agribusiness trade, such as rice and tea, due to rising consumption at the domestic level.

'€œWe have increased the portion of domestic trade finance to 50 percent in Danamon, so it is more balanced with foreign trade finance. We also have a lot of networks across the country to support domestic trade finance,'€ she added.

As of September last year, Bank Danamon had booked Rp 139 trillion in loans, an increase of 7 percent from the same period of 2013.

Also on Thursday, Danamon sharia business director Herry Hykmanto said the agreement with ITFC was expected to grow the bank'€™s sharia trade financing, which stood at around Rp 200 billion last year.

Herry said Danamon was the first Indonesian bank to cooperate with ITFC in sharia trade finance, as the foreign lender saw Danamon as one of the top players in the trade finance business in the country.

'€œOur sharia trade finance is still small, but this agreement will help us to grow significantly because ITFC has a vast network of IDB member countries. ITFC has its own niche market,'€ he said.

The cooperation '€” expected to achieve $1 billion in the first five years '€” also includes joint-trade financing that will offer a complete trade finance service with competitive prices to Danamon'€™s corporate and commercial customers.

'€œThe majority of the funds will be channeled to export and domestic financing, especially the food and agribusiness sectors. However, we will use it for imports too if there are strong opportunities,'€ Herry said.

ITFC deputy CEO Hani Salem Sonbol said the agreement was in line with ITFC'€™s core mandate to provide trade financing and intra-trade facilitate among IDB'€™s member countries and globally.

'€œAs a financing institution, the bilateral agreement is part of our strategy to help grow Indonesia'€™s economy. We chose Danamon because it has good portfolios of sharia business and trade finance,'€ he said.