International Trade Payment & Finance Practice of Bangladesh
Introduction
International trade is the backbone of our modern, commercial world. Producers in various nations try to profit from an expanded market, rather than be limited to selling within their own borders. There are many reasons that trade across national borders occurs, including lower production costs in one region versus another, specialized industries, lack or surplus of natural resources and consumer tastes. This trend is attributable to the increased globalization of the world economies and the availability of trade payment and finance from the international banking community. Although banks also finance domestic trade, their role in financing international trade is more critical due to the additional complications involved. First, the exporter might question the importer’s ability to make payment. Second, even if the importer is creditworthy, the government might impose exchange controls that prevent payment to the exporter. Third, the importer might not trust the exporter to ship the goods ordered. Fourth, even if the exporter does ship the goods, trade barriers or time lags in international transportation might delay arrival time.
There are a number of methods of trade payment. Before importers and exporters decide to do business with each other they need to understand and adopt a method suitable to meet their specific needs. The contract between buyer and seller will specify the way in which payment is to be made. Certain methods of payment are less risky than others. It is up to the buyer and seller to agree on a method that suits them both. The choice of payment method is affected by several factors like requirements of the seller and buyer, relationships between the trading partners, the operating environment and associated risks, object of transaction and market conditions etc. Once acceptable risks have been determined then the most appropriate payment method can be selected.
Exporters use different methods of financing international trade,
International trade is the backbone of our modern, commercial world. Producers in various nations try to profit from an expanded market, rather than be limited to selling within their own borders. There are many reasons that trade across national borders occurs, including lower production costs in one region versus another, specialized industries, lack or surplus of natural resources and consumer tastes. This trend is attributable to the increased globalization of the world economies and the availability of trade payment and finance from the international banking community. Although banks also finance domestic trade, their role in financing international trade is more critical due to the additional complications involved. First, the exporter might question the importer’s ability to make payment. Second, even if the importer is creditworthy, the government might impose exchange controls that prevent payment to the exporter. Third, the importer might not trust the exporter to ship the goods ordered. Fourth, even if the exporter does ship the goods, trade barriers or time lags in international transportation might delay arrival time.
There are a number of methods of trade payment. Before importers and exporters decide to do business with each other they need to understand and adopt a method suitable to meet their specific needs. The contract between buyer and seller will specify the way in which payment is to be made. Certain methods of payment are less risky than others. It is up to the buyer and seller to agree on a method that suits them both. The choice of payment method is affected by several factors like requirements of the seller and buyer, relationships between the trading partners, the operating environment and associated risks, object of transaction and market conditions etc. Once acceptable risks have been determined then the most appropriate payment method can be selected.
Exporters use different methods of financing international trade,