International factoring mechanism will help the country increase efficiency in its foreign trade raising export volume and lowering cost of import, said experts at a seminar yesterday.
They said letter of credit, traditionally used as a system for payment in international trade, is gradually losing its acceptability.
Non-LC mechanism, particularly open account trade payment and documentary collection, also have many barriers including time consuming process of payment, the speakers said.
The seminar styled as “International Factoring for Foreign Trade” was jointly organised by International Chamber of Commerce (ICC), Factor Chain International (FCI), Asian Development Bank (ADB) and Bangladesh Institute of Bank Management (BIBM) at a city hotel.
Commerce Minister Tofail Ahmed was present as chief guest, welcoming the international factoring mechanism as a “great initiative” for the country’s foreign trade payment.
“But as a number of issues are related with this, we will have to discuss further about the mechanism to bring a fruitful outcome in the country’s export-import trade payment,” he, however, said.
ICC, Bangladesh president Mahbubur Rahman presided over the seminar.
“International factoring provides a simple solution to problems in case of such non-L/C trade payment,” he said.
Mahbubur Rahman said under the system the export factors/banks collect money from abroad by approaching importers through importers’ banks/factors in their own country, in their own language and in the locally accepted manner.
“An import factor/bank provides exporters with 100% protection against the importer’s inability to pay. Exporter’s bank also finances 80% of the invoice value to the exporter immediately after shipment.” ICC,B president added.
ADB Bangladesh senior financial sector specialist Bidyut Kumar Saha said although the international factoring is not a popular method in the country, it would be a new and alternative financing tool to increase international trade more smoothly and more safely.
FCI chairman Daniela Bonzanini said: “Asia is the largest market for international factoring mechanism. As economy in Bangladesh has been rapidly developing with growing GDP rate, so this trade payment mechanism would be a better option for all stakeholders.”
