NEED FOR EXPORT

FINANCE
• Without exception, every country on the globe has
some form of export financing or guarantee
program.
• The point of this is to both encourage exports and
boost the profitability of domestic firms involved in
exporting.
• The importance of this sort of financing is difficult
to exaggerate, since so much hard currency is
earned through exports.
• Entire economies, such as the Korea or Chinese, are
based around exports.
• Export financing has helped turn third world
countries into international economic powerhouses.
Financing
• Export financing programs; often
take the form of guarantees for
foreign buyers.
• The purpose here is identify credit-
worthy foreign buyers and make
cheap loans to them.
• These loans are meant to solely be
used to buy exports and boost the
profitability of exporters.
Credit
• Export financing is about making it easy for buyers to favor exports
over competitors.

• In a sense, this is a form of “corporate welfare” because tax payer

guaranteed loans, under normal interest rates, are being extended
to foreign buyers so as to buy goods.

• The profits do not go to the tax payer, but to the private firm.

• However, the theory is that such export expansion will eventually

trickle down to the tax payer through the earning of hard currency,
the slow elimination of the trade deficit and the creation of local
jobs.

• Therefore, the importance of this sort of loan guarantee is meant

to focus around the creation of domestic employment that might
otherwise go to foreign exporters.
Development

• This is a form of export finance that is designed to permit

third-world states to update their information.
• In one sense, this is a form of foreign aid. In another, it is a
form of export financing.
• The theory is that exports will be boosted if the facilities of
the developing world are regularly updated so as to handle
increasing volumes of products.
• The government will service ports, warehouses, processing
plants and loading equipment under the condition that the
government increases its imports.
• With the new and updated equipment, the country in
question can import more goods while at the same time
increasing its capacity to handle more imports.
Exports
• Export financing is central to improving the present dismal balance of trade in
the country.

• Companies can take advantage of these loan programs to not just make it easier
to export, but also identify which buyer’s credit are worthy.

• There are always risks in exporting, since the buyers are not under the law.

• This means that the power of the firm to recover losses is minimal in case of
default or fraud. With these and many other similar programs, firms can bosst
exports through assistance given to foreign buyers.

• These buyers become loyal to products, which in the long run, can only help the
economy.
The areas where finance essentially needed, after one obtain an export order will be:
a) Procurement of raw materials and components, and manufacture of the product.
b) Refinance facilities so as to get proceeds of export bills at the time of negotiation
of export documents, soon after shipping the goods.
c) Availability of funds until the export benefits are realized.
d) Refinance facilities for long-term credits offered for the export of products.
The scheme of export financing available to
an exporter in India are reasonably liberal
and it may be safely stated that no export
contract would normally be frustrated for
lack of finance. Financial institutions, like
commercial banks, require basic procedural
formalities to be completed between the
buyer and the exporter to enable them to
provide the necessary financial facilities to
the exporter, whether such facilities extend
over a short, medium or long term.
Thank You