Importers are no more interested to import through opening L/C. Under L/C, importers have to provide required margin and sufficient security to their banks in order to confirm L/Cs. Even for a successful importer, there comes a time when the growing requirements for L/Cs margin go beyond the importer’s financing ability and L/Cs coverage exceeds the security available to give to the bank. Moreover, importers need to approach banks for issuing L/Cs on each occasion of importing goods from abroad, which is really time consuming for foreign trade.
In L/C operation procedures, several banks named issuing bank, collecting bank, negotiating bank, presenting bank, confirming bank are involved said ICC Bangladesh President Mahbubur Rahman at the seminar on International factoring for Foreign trade jointly organized by International Chamber of Commerce-Bangladesh (ICCB), Factors Chain International (FCI), Asian Development Bank & Bangladesh Institute of Bank Management (BIBM).
Involvement of many banks increases the cost of international trade and creates barriers in different steps of operation. Moreover, L/C confirmation fees takes away a substantial amount of foreign currency to abroad and increases the cost of international trade. Importers are therefore no more interested to import by opening L/C. To fulfill the demand of the importers for credit terms, our exporters need to export under international factoring which is also as secured as L/C, he added.
Mr. Tofail Ahmed M.P., Minister for Commerce in his address said exporting on open account, which may be best from a marketing and export point of view, is fraught with danger. International factoring removes the danger of open account trade under two-factor system very easily regardless of whether exporter is a small or large organization. Under this international financing mechanism, the exporter gets finance immediate after submitting the relevant documents to the export factor and the import factor/bank collects money with 100 per cent protection at the end of the approved period from the importers of the same country and in the locally accepted manner. Mr. Tofail Ahmed was addressing the Seminar as a Chief Guest.
Though potential is enormous in terms of projected growth of our export , a conducive environment is required to be created with view to encountering legal, organizational and strategically issues after launching .In this perspective, an expert committee can be formed to suggest as to how to introduce this financial product, the Minister added.
Special Guest of the program, Ms. Nazneen Sultana, Deputy Governor of Bangladesh Bank said that BB is always committed to provide both financial and non-financial supports to our exporters and importers. There is substantial scope for introduction of international factoring in the country. However, many issues are likely to be encountered while launching this service. These issues are primarily related to the legal, strategic and organizational aspects, she added.
The seminar was also addressed by Muhammad A. (Rumee) Ali, Chairman ICC Standing Committee on Banking Technique and Practice; Daniela Bonzanini, Chairman, Factors Chain International, The Netherlands; Mochel LeBlanc, Member FCI Executive Committee; Dr. Toufic Ahmed Chaudhury, Director General, BIBM; Mr. Bidyut Kumar Saha, Senior Financial Sector Specialist, Aian Development Bank; Dr. Prashanta Kumar Banerjee, Professor & Director (Research, Development & Consultancy), Bangladesh Institute of Bank Management (BIBM) & ICCB Secretary General Ataur Rahman also spoke in the occasion.
Among others, the seminar was also attended by ICCB Vice Presidents Latifur Rahman & Rokia Afzal Rahman; ICCB Executive Board Members Aftab ul Islam, Mahbub Jamil, Mahbubul Alam, and Mohammad Hatem.
