Professional Documents
Culture Documents
TRADE FINANCE
Export Finance Scheme (EFS) SBP / Export
Refinance (ERF) (BANKS) SCHEMES
Suppliers Credit: Credit provided by supplier
(exporter) to buyer (importer)
EFS started in 1973 by SBP
SBP Funds involved
Concessionary Finance (markup rate < market
rate)
Max Tenor 180 days
Commercial Bank Fund NOT involved
To encourage exporter by meeting their
operating requirements
Country Foreign Exchange Reserves
Trade Balance / Current A/c improve
Max. Spread of Commercial Bank: 1% (bank
may reduced his share of 1% as per mutual
consent between bank and customer)
Example:
SBP EFS Rate= 9% + Comm. Bank Spread = 1%
Markup Rate Charged to Customer = 10%
Markup: 6 months weighted average T-Bill Rate
Soverign Debt: State Debt / Borrowing by GoP
Post-Shipment Facility
Shipped on Board (Consignment has been
loaded on ship)
B/L (Bill of Lading) Airway Bill
R/R Railway Receipt Bill-T (Pronounced as BILTY)
ERF-II Limit Disbursement
Dr: Loan A/c Cr: Exporter/Customer A/c
ERF-II Limit Adjustment
Dr: Exporter/Customer A/c Cr: Loan A/c
All export proceeds in Foreign Currency are
surrendered to SBP and Pak Rs Eq is credited to
customer a/c
Yield from Customer
1. Markup from ERF Loan (Normally 1%)
2. Earning on Deposit (Export Proceeds)
3. Exchange Earning
4. Export Loan /Doc Processing Charges
NON-FUND FACILITIES
Assurances / Undertaking / Guarantee
PRODUCTS
L/C: Letter of Credit
L/G: Letter of Guarantee
LC – Letter of Credit
It is an authority issued by the Issuing Bank on behalf of
importer in favor of exporter with the undertaking that
the Drafts (Bill of Exchange) drawn there-under will be
duly honored provided the terms and conditions of the
Credit are duly complied with.
Irrevocable / Revocable LC
LC Established (open)
IMPORT EXPORT
1)Importer (Buyer) 3)Exporter (Seller)
2)Issuing Bank 4)Advising Bank
One off Facility OR Regular Limit
500M / Tons Edible Oil Import from Malaysia
@ USD 470 / M.Ton USD 235,000/- (PKR 39.245M)
1USD = PKR167
SECURITY
Cash Margin 10% (0% - 100%) (Rs 3.92million) Margin A/c
LC Documents
1. Commercial Invoice
2. Bill of Exchange
3. Insurance Document
4. Transport Document (Bill of Lading)
5. Packing List
6. Certificate of Origin
7. Phytosanitary Certificate
8. Other (quality/inspection) Certificate
LC Documents Lodgement
Sight LC
Dr: PAD (Payment Against Documents)
Dr: Margin on LC
Cr: Nostro A/c (Our A/c with You (Citibank, AMEx)
Contingent Liability Reversal
DR: Bankers Liability L/C 39.245M
CR: Customer Liability L/C 39.245M
D/A L/C Documents Lodgement
LC D/A Contingent Liability Reverse
DR: Bankers Liability L/C
CR: Customer Liability L/C
LC Acceptance Liability Creation
DR: Customer Liability Acceptance
CR: Banker’s Liability Acceptance
Types of LC
Sight LC – Amount payable as soon as the documents are
checked by bank and presented to customer for payment
D/A LC (Documents Against Acceptance)
Also known as Usance LC or Acceptance Credit
Time usage
Time cushion permitted to pay foreign exchange bill
60 Days from B/L Date (B/L Date 31-3-2020) 30-5-2020
Underlying BoE will be called Time Draft
Deferred Payment LC
Payment against LC is due after time as ascertained in LC
Provides payment grace period to importer
Back to Back LC
Exporter, on the strength of LC received (as advised)
establishes an import LC in favor of a third party in order
to meet its export commitment.
Transferable LC
LC endorsed by original exporter in favor of third party
supplier/exporter
CHANGE DRIVERS
Globalization
Technology
Automation
Information Technology
Communication
Mode of Transporation
Innovation
BANK GUARANTEES
Bank Guarantee / Letter of Guarantee (L/G)
A written contract issued by a bank (Guarantor) on
behalf of a customer/applicant (Debtor) in favor of
beneficiary (creditor) whereby the bank undertakes to
pay or discharge the liability of the debtor in case of any
default.
Bid Bond 2M
Performance Bond 20M
Total Limit PKR 22M
Example
Contract Amount PKR 100,000,000
Bid Bond Required 2% of Contract Value
So 2% of PKR 100M PKR 2,000,000
Assuming Cash Margin on Bid Bond 10%
L/G Commission Rate 0.4% / Quarter
Time Period 1 Quarter
Accounting Entries (Bid Bond Issuance)
DR: Customer Liability Bid Bond PKR 2,000,000
CR: Banker’s Liability Bid Bond PKR 2,000,000
Example
Contract Amount PKR 100,000,000
Performance Bond Required 10% of Contract Value
So 10% of PKR 100M PKR 10,000,000
Assuming
Cash Margin on Performance Bond 10%
L/G Commission Rate 0.4% / Quarter
Time Period 1 Quarter
SME-1 BoD approved Credit Policy. Prog Based Lending. Business Visits
SME-4 Clean Facility (only P/G) < = PKR 5M. (Clean Consumer separate)
1Yr D 50%
G Corp Gov
O Ops
R-7 Guarantees