6 years ago

Buyer's credit facility  

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BUYER'S credit facility has been gaining popularity in the country. Bangladesh Bank statistics shows that it has worked as a great leap forward. Under the facility, importers get short-term loans in foreign currency to import capital machinery and raw materials. Banks provide such facility under their offshore banking units and the process helps facilitate international trade greatly. Importers are often unable to make payment to exporters due to lack of fund and banks or financial institutions make payment on their behalf against buyer's credit facility. The importers pay back the banks and financial institutions for the short term foreign currency loan along with interests within a given time.

The buyers/importers avail buyer's credit facility as a short term loan facility for repayment of dues of the exporters. One of the main reasons of upturn in buyer's credit is its interest rate. If the importers receive loan in local currency, interest has to be paid at a staggering rate of 8-9 per cent whereas an importer has to pay only 3.5-4.5 per cent in case of foreign currency loan. However, due to increasing demand of foreign currency loans, demand for local currency loans has gone down and excess liquidity has been created which the banks can neither lend nor invest and the fund remains unutilised.

Mohammad Zonaed Emran

MNC Banking  Unit

Corporate Head Office

Mutual Trust Bank Limited

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