Improving the SMEs Access to Trade Finance DRAFT
in the OIC Member States
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goods are in the control of a trusted third-party, and that this party has issued a “Trust
Receipt”, on the basis of which financing may be provided.
There are additional instruments or variations of mechanisms related to the financing of
international trade that are used to address a wide range of requirements and to provide
viable financing and risk mitigation options across a wide variety of political, economic and
commercial contexts.
f. Importer credit
An importer credit is used to finance an export over a medium or long term. Funds are lent
directly to the foreign importer as a means of encouraging the purchase of the goods from a
particular exporter. These credits are usually suited to large transactions involving capital
goods or to turnkey projects.
g. Supplier credit
A financial institution purchases a foreign importer’s debt from their exporter client.
Arranging this type of financing may be easier and more economical than arranging an
importer credit, because the bank or lender does not have to negotiate directly with the
foreign importer. Supplier credits are generally suited to transactions with a value between
$100,000 and $5,000,000, with terms of payment ranging from six months to five years.
h. Forfaiting
Forfaiting, or forfait financing, is usually a medium-term form of exporter credit provided by
trade banks. A bank purchases promissory notes due to the exporter from a foreign importer.
The value of the promissory notes is discounted at a fixed rate so that the exporter receives
cash, after deduction of the interest charge or discount.
i. Countertrade
Countertrade is an arrangement in which a sale to an importer is conditional on a reciprocal
purchase by the exporter. It therefore includes any international trade contract in which the
reciprocal obligations of the parties are substituted for payment in kind. Instead of being paid
in cash for a shipment, the exporter receives products—or even certain kinds of services—
from the target market. Several types of countertrade common in international trade include
barter, counter purchase, advance purchase, buybacks, bilateral, and offset arrangements.
j. Export leasing
Exporters can use leasing arrangements when dealing with countries where import
restrictions prevent the importer from purchasing foreign equipment. Export leasing can also
be used when a country’s tax regime favours leasing over purchase, so that the importer can
acquire capital goods cost-effectively.