In addition to the traditional Export credit agency-financed
facilities, as an alternative solution, Exim Credit Bank –(ECB)
also offers forfaiting to its customers. Forfaiting means the
purchase, without recourse, of bank-guaranteed receivables from
Export sales, transforming a deferred-payment transaction into a
prompt-payment one, and thus relieving the Exporter from the
- commercial,
- country (political and transfer),
- exchange rate, and
- collection
risks
arising from the receivable.
The Export receivables
must be embodied or guaranteed by an unconditional, irrevocable
banker instrument (e.g. deferred-payment letter of credit, bank
guarantee). If the bank concerned is acceptable, there is no
need for any additional securities. The transaction can be
concluded quickly and requires only simple documentation, so
there are no substantial administrative and legal costs.
The trends of recent years show that it is
increasingly difficult for Exporters to enter into arrangements
with their customers under which the latter provide a bank
guarantee or deferred-payment letter of credit as security for
the deferred payment. It is with these situations in mind that
Exim Credit Bank –(ECB) and ECI Trade Insurance, EDFS jointly
offer a facility in which the insurer provides insurance
(Facility C for the Exporter, and Facility CF for the bank), and
the bank purchases the receivables with this insurance serving
as security for the transaction.