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World bank Export and import finance methods

World bank

The world bank is an international financial institution that provides loans to developing countries for capital programs. The world bank's official goal is the reduction of poverty. According to its articles of agreement (as amended effective 16 February 1989), all its decisions must be guided by a commitment to the promotion of foreign investment and international trade and to the facilitation of capital investment. The world bank comprises two institutions: The international bank for reconstruction and development (IBRD) a The international development association (IDA).

Export and import finance methods

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Factoring is a financial transaction in which a business sells its accounts receivable (i.e., Invoices) to a third party (called a factor) at a discount. Letter of credit (L/C) These are issued by the bank on behalf of the importer promising to pay the exporter upon presentation of the shipment documents. The importer pays the issuing bank the amount of the L/C plus the associated fees. Commercial or import/export L/Cs are usually irrecoverable. The required documents typically include a draft, a commercial invoice, and a bill of lading (receipt of shipment). Sometimes the exporter may request that the local bank confirms the L/C.

Export and import finance methods

A banker's acceptance, or BA, is a promised future payment, or time draft, which is accepted and guaranteed by a bank and drawn on a deposit at the bank. The banker's acceptance specifies the amount of money, the date, and the person to which the payment is due. After acceptance, the draft becomes an unconditional liability of the bank. But the holder of the draft can sell (exchange) it for cash at a discount to a buyer who is willing to wait until the maturity date for the funds in the deposit.

Export and import finance methods

WORKING CAPITAL FINANCE is that the banks may

provide a short term loans that finance the working capita cycle, from the purchase of inventory until the eventual conversion to cash.

MEDIUM TERM CAPITAL GOODS FINANCING(FORFAITING)

The importer issues a promissory note to the exporter to pay for its imported capital goods over a period that generally ranges from three to seven years. The exporter then sells the note, without recourse, to a bank (the forfeiting bank).

Export and import finance methods

Counter trade

These are foreign trade transactions in which the sale of goods to one country is linked to the purchase or exchange of goods from that same country. Common countertrade types include barter, compensation (product buy-back), and counter purchase. The primary participants are governments and multinationals.