The government should introduce international factoring system which will expedite export and import activities by reducing cost of letters of credit under the existing system, experts and business leaders said in Dhaka on Sunday. At a seminar on ‘international factoring for foreign trade ’ held at Westin Hotel in the capital, they said that factoring system, an instrument of payment and financing in international trade, would ensure full protection of export earnings against the importers’ inability to pay or deferred payment. The International Chamber of Commerce Bangladesh, Netherland-based Factor Chain International, Asian Development Bank and Bangladesh Institute of Bank Management jointly organised the seminar. The international factoring system is better for export and import of consumer goods than that of the existing LC system as the businesspeople have to open LCs frequently with the banks to import or export of such items, said the speakers. International factoring is a method of financing under which a third party, called factor company — mostly bank, financial institution or specialised factor company — offers services of purchase of invoices, bills or accounts receivable. An exporter/seller can sell his/her invoices or accounts receivable on supply of goods to a factor and can get prices of goods in advance that reduce the risk of non-getting export earning or deferred payment. Under the international factoring system, the banks do not require to provide any LC confirmation charge while the businesspeople do not give collateral securities with the banks. The country will save huge amount of foreign exchange by not giving LC confirmation charge to the foreign banks if the businesspeople settle their imports through the factoring system, the speakers said. The banks will have to receive membership from Factor Chain International or International Factor Group to enjoy the facility. If any dispute arises between importer and exporter, the factor organisation will dissolve the crisis. Commerce minister Tofail Ahmed, who attended the seminar as chief guest, said Bangladesh Bank and other government departments concerned would scrutinise the international factoring system before introducing it. It is a tough job to introduce the system as the country’s businesspeople are used to the existing LC process to settle their exports and imports for long, he said. He claimed that the ongoing political unrest due to non-stop blockade and frequent hartals enforced by BNP-led opposition alliance had failed to put any adverse impact on the economic activities as the export growth continued to register a satisfactory growth in the period. BB deputy governor Nazneen Sultana said that international factoring had already got momentum in the developed countries including some from Asia. ‘The BB is positive to introduce any new method to liberalise the country’s foreign exchange regime. As part of the move, it took a number of initiatives in the last five years’, she said. A supervisory framework should be constituted to introduce the international factoring, Nazneen said. Daniela Bonzanini, an official of Factor Chain International, said that a number of Asian countries including Japan, China and Taiwan had already introduced the factoring system which expedited their business volume hugely. Bangladesh will get opportunity from the factoring system as it business volume is increasing rapidly, she said. BIBM professor and director Prashanta Kumar Banerjee said, ‘Businessmen generally face several problems in opening LCs as they have to fulfil many conditions imposed by different parties including importers and banks and maintaining LCs is costly and time consuming while factoring is comparatively less costly and hassle free.’ Some importers have to open LCs frequently in a month to import consumer goods meaning that they count margin, LC confirmation charge and collateral securities, he said. They will be able to avoid such type of hassle if they can use the factoring system, Prashanta said. ‘So, it is the high time to introduce the factoring system in the interest of expanding the country’s economic volume,’ he said. ICCB chairman Mahbubur Rahman presided over the seminar while BIBM director general Toufic Ahmad Choudhury, former BB deputy governor Muhammad A (Rumee) Ali and FCI secretary general Peter Mulroy spoke, among others, spoke.
Source: https://newagebd.net/111181/introduce-intl-factoring-system-to-expedite-exports-imports-experts/#sthash.SG0hkh6o.dpuf
