DRAFT Improving the SMEs Access to Trade Finance
in the OIC Member States
7
Table 2: Payment/Settlement Options in Trade Finance
Source: Forum for International Trade Training (FITT), International Trade Finance Textbook,
2005.
The choice of settlement or payment mechanism is a function of the degree of trust established
between buyer and seller, the degree of perceived or actual risk of non-payment or non-
performance of contract obligations and the impact of any macro-factors such as foreign
exchange controls or limitations in the importing country. Additionally, the degree of leverage
or influence of one trading partner over the other may also influence such a choice. Exporters
that provide a unique product that is not easily sourced elsewhere, for example, might insist on
payment in advance. Each settlement option implies a particular sharing of risk between buyer
and seller.