EXPORT FINANCING:

1. What are the purposes for which Export Credit allowed? Write down different types of pre shipment Export Credit facility allowed by banks?

Ans.  Pre-shipment credit is given by the bank for following purposes:

i). Cash for local procurement & meeting other expenses.

ii). Procurement & processing of goods for export.

iii). Packing & transportation of goods for export. iv). Payment of Insurance Premium.

v). Inspection fees.

vi). Freight charges.  

Different types of pre shipment credit facilities are:  

i). Export Cash Credit (Hypo.)

ii). Export Cash Credit (Pledge)

iii). Export Cash Credit against Trust Receipt.

iv). Packing Credit.

v). Back to back Letter of Credit.

1. What are the terms & conditions to be mentioned in a back to back L/C?

Ans. The back to back L/C must conform with the terms & conditions of the original letter of credit except the followings:  

i). Name of the beneficiary to be substituted by that of the actual supplier.

ii). L/C value will normally reduced from the original L/C value. The difference is the margin amount of profit to be earned by the exporter.

iii). The back to back letter of credit shall be made valid for shipment and negotiation prior to expiry of the corresponding date of the export L/C.

1. What are the documents required for pre shipment export credit facility?

Ans. i). Lien of original Export L/C.

ii). Letter of Hypothecation duly stamped.

iii). Letter of Pledge duly stamped.

iv). Letter of Trust Receipt.

iv). Detailed stock statement duly verified by the bank officials.

v). Letter of disclaimer to be signed by the owner of godown in case of rented godown.

vi). Documents of title of goods.

vii). Insurance coverage.

viii). Export Credit guarantee Scheme.

ix). Export form duly signed by the exporter.

x). EPC/ERF duly certified by Bangladesh Bank.  

1. What do you mean by EDF? What are the prerequisite to get EDF?

Ans. The main objectives of creating an Export Development Fund (EDF) at the Bangladesh Bank is to assure a continued availability of Foreign Exchange to meet the import requirements of non traditional manufactured items. This facility is available to the non-traditional exporters, particularly new exporters diversifying into new markers.

Prerequisite to get EDF are as follows:

i). He must be an exporter of non traditional manufactured items.

ii). The value added of these products could be 20% except in the case of garments where it has to be 30% and above.

iii). The loan should be utilized in the case of importing raw materials for manufacturing the exportable products.

iv). The exporter must have an export L/C

v). He must create a back to back L/C for importing raw materials.

vi). The period of loan is 180 days.

vii). The exporter can borrow as many times as he likes.

viii). The interest rate is LIBOR+1%

ix). An exporter can borrow an amount not exceeding $5.00 lac in a single case but outstanding should not be over $10.00 lac.

x). He has to have an Export Credit Insurance through E.C.G.S.   As for banker, the EDF allows a spread between 2.5% for the established exporters and 3.5% for the new exporters for every loan for the client.