Commerce Minister Tofail Ahmed yesterday said the international factoring system removes the danger of open account trade under two-factor system very easily, regardless whether an exporter is a small or large organisation, reports UNB. The Minister said this while addressing a seminar on ‘International Factoring for Foreign Trade’, jointly organised by the International Chamber of Commerce (ICC) Bangladesh, Factors Chain International (FCI), Netherlands; the Asian Development Bank (ADB), and Bangladesh Institute of Bank Management (BIBM). Factoring is a type of debtor-financing which is a better alternative to L/C for the ease of access it provides to short-term finance. Factoring allows a business house to sell its invoice to a third-party, called a factor, at a discount to meet its immediate cash requirements. Tofail Ahmed said under this international financing mechanism, the exporter gains finance immediately after submitting the relevant documents to the export factor and the import factor/bank collects money with 100 per cent protection at the end of the approved period from the importers of the same country in the locally accepted manner. ICC Bangladesh president Mahbubur Rahman said involvement of many banks increases the cost of international trade and creates barriers in different steps of operation. Moreover, Letter of Credit (L/C) confirmation fees takes away a substantial amount of foreign currency abroad and increases the cost of international trade. Importers are no more interested to import by opening L/C. To fulfill the demand of the importers for credit terms, our exporters need to export under international factoring which is also as secured as L/C, he added. The seminar informed that factoring in Bangladesh has been very limited, whereas factoring in most other regions of the world, even within South Asia, has exploded with the shift towards open account trade.
Source: https://www.theindependentbd.com/index.php?option=com_content&view=article&id=254693:factoring-can-open-new-avenues-in-trade-finance&catid=110:business-others&Itemid=156
