Import Finance & Export Finance

Mainly three types of import are done purpose wise

1.      Import of trading item for ultimate consumer

2.      Import of raw materials or industrial item for further processing or further production

3.      Import of capital machinery & capital item

For the first 2 types, finance can be done in Bai Murabaha and bai Muajjal for the first two eg

1.      Import of trading item for ultimate consumer

2.      Import of raw materials or industrial item for further processing or further production

 For the third type, HPSM mode is used.

Import finance can also be done under bai Salam/ Musharaka/ Mudaraba Mode. Bai Murabaha is made under single deal covering the investment at LC stage, Bill stage and post import stage as under:

i.                    Murabaha Import L/c

ii.                  Murabaha Import bills

iii.                Murabaha post import

The main head is Murabaha Import.

Export Financing:

Export finance can be done in 2 ways:

Pre shipment finance:

Post shipment finance

Pre shipment finance:

i.                    Back to bank lc

ii.                  Bai Murabaha TR

iii.                Bai Salam

iv.                Musharaka

Post shipment finance

i.                    Bai as sarf (FDB)

ii.                  Musharaka Documentary bills Inland

iii.                Quard against substitute cash assistance

Bi As-Sarf

Bi As-Sarf is a contract of exchange of money for money. Ibn Rushd examines the three forms of sale that can arise in a market where goods and money are in existence: ʺwhen two commodities are exchanged, one may serve as a currency and the other as a priced commodity, or both may be currencies. When a currency is exchanged for a currency the sale is calledʹsarfʹ, and when a currency is exchanged for a priced commodity, the transaction is sale proper (ʹbaiʹ as).

Basic Features of Bi As-Sarf (FDB):

Bai As Sarf may be categorized in 2 types:

1. Bai-As-Sarf (Foreign Documentary Bill-FDB) and

2. Bai-As-Sarf (Foreign Cheques Draft-FCD)

Bank purchase the foreign currency value of the documents in equivalent Taka under Bai-As-Sarf: Foreign Documentary Bill (FDB). The relationship between the Client and the Bank shall be treated as seller and buyer. An Agreement for Bai-As-Sarf (FDB) will have to be executed between the Bank and respective Client on case to case basis having a validity period. Client approaches the Bank to sell the Foreign Currency realizable against their Export Documents/Bill under Export LC / Contract issued/transferred in his/their name. There is an agreed rate of purchase i.e Exchange Rate (OD sight Export Bill/Usance rate).

Bai-As-Sarf to be made as per generated (invested) amount to be calculated by deducting the required/proposed amount for BB LC/Bills and FC A/C(ERQ) from the bill value. The ERQ amount to be retained within the ceiling fixed by the Bangladesh Bank is to be proposed by the Client before disbursement under Bai-As-Sarf(FDB). The client will get net amount from the disbursed amount after adjustment of related liabilities. After realization of documents value from the Issuing Bank abroad the Bai-As- Sarf liability will be adjusted and Bank will earn exchange income. Personal Guarantee also to be taken as security. In case of the Clientʹs failure to repatriate the export proceeds by any consequence even for which the client is not responsible, the Client shall be liable to pay back the amount paid to him in connection with the said documents with compensation/ fine/ penalty to the Bank at the calculated rate from the stipulated date of delivery.

 Musharaka Documentary Bills (MDB) Inland

In order to avoid the risk associated with the Foreign Currency Positions against purchase of Inland Export Bills and at the same time to meet the finance need of the valued clients, Bank introduces Musharaka Mode of Finance i.e MDB in place of Inland Bills Purchased (IBP).

Procedure of MDB

After shipment of the goods, the Client(Exporters/Deemed Exporters) submit their proposal for Musharaka Finance in the prescribed format declaring his/their equity portion and profit of the deal and the ratio at which profit to be shared with the Bank accompanying the required documents as per LC/Contract. Branch will complete appraisal of the proposal to see the profitability of the proposal. If the proposal is found profitable & satisfactory (keeping in view the anticipated minimum profit/R.R. of the bank) Branch will issue Sanction Advice in favor of the Client & will enter into a Musharaka Agreement with the Client. Bank will send the documents drawn on foreign currency to the L/C Issuing Bank for Acceptance.

Short realization/ deductions against the bill to be excluded from bill value at the time of disbursement of MDB, if the amount is so mentioned in the related LC/ Acceptance. When not mentioned in related export LC/Acceptance, but proceeds are realized with some deduction, the deductions are to be treated as expenses on the part of the Client and to be realized from the equity portion of the Client.

As per Article 2 of UCP 600, 'Negotiation means the purchase by the nominated bank of  drafts (drawn on a bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the Nominated Bank.' If it is decided to purchase the bill we may create the Bai As Sarf by passing the following voucher:

 Dr. FEBL (0915)

Cr. FEBC (6015)

Upon receipt of the Acceptance Letter & after completing proper documentation, Branch may/will disburse the Musharaka investment taking into consideration the equity of the Client and anticipated profit of the deal. There will be an Applicable Exchange Rate(Tk 74.50 per USD w.e.f 28.05.2013) 

If the Client avails any pre shipment finance i.e. Bai Salam against the related Export LC/Contract or any other investment in the form of MPI, Bai Murabaha, HPSM Branch will adjust the same from the disbursed amount(maximum 15% may be allowed to the Client's A/C). The Tenure of MDB Investment to be calculated for 180 days from the date of disbursement. Documents handling commission & other charges from the bill value will be realized at the time of realization of proceeds

For MDB, Dr IEBL, Cr :IEBC

Collection:

Collection is a method of payment in which goods are shipped and a Bill of Exchange is drawn on the buyer for sight payment or for acceptance.

Types of collection:

1. Clean Collection (by Financial Documents only)

2. Documentary Collection (by Financial Documents accompanied by Commercial 

Documents or only Commercial Documents not accompanied by Financial Documents). We use Documentary Collection in case of sending discrepant documents on approval basis or if the Client not willing to negotiate the documents at lower rate. If the documents are sent beyond the LC arrangement then the collection will be under 'Uniform Rules for Collection (URC 522). 

Process of Documentary collection: 

Seller shipped the goods and a Bill of Exchange is drawn on the buyer for sight payment or for acceptance. Seller submits the bill of exchange and other documents to his bank (Remitting Bank). 

Remitting bank send the bill of exchange & other documents along with a collection letter to the Correspondent Bank (Collecting Bank) usually located in the same city as the buyer with clear instruction for collection.

Documents are delivered only when the payment is made or the draft is accepted by the Buyer. Acting as an agent of the Remitting Bank, Collecting Bank notifies the buyer upon receipt of the bill of exchange and other documents. All the documents are released to the buyer upon the receipt of payment or on the acceptance of bill of exchange. When we send the documents for collection the following voucher to be passed:

Dr. IEBC (0913) Cr. IEBL (6013) 

.