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Documentary Credit World

Documentary Credit World (DCW) - March 2024 Vol. 28 No. 3 section - Updates

Prime Bank’s International Factoring Deal a First for Bangladesh

In a transaction facilitated by FCI’s edifactoring platform, Prime Bank has announced it is the first local bank in Bangladesh to successfully conduct an international factoring deal. According to published reporting and information obtained by DCW, the transaction for USD 3 million credit cover involved Bangladesh’s FGS Denim Wear Ltd. as exporter/  seller and Italy’s UniCredit Factoring S.p.A as import factor.

FCI’s edifactoring platform serves to support the two-factor business model of FCI members through a set of electronic document interchange (EDI) messages. Prime Bank first joined FCI as an Affiliate Member (non-transactional) in 2019 and later became an Associate Member in 2021.

Prime Bank’s use of international factoring was praised for meeting a years’ old central bank objective seeking to bring easier access to finance by exporters. In its FE Circular No. 25 issued 30 June 2020, Bangladesh Bank empowered financial institutions under its authorization to allow exporters to ship goods on sales contracts under open account credit terms, subject to compliance with specified instructions. Such parameters require that exports shall be executed against payment undertaking/payment risk coverage for settlement of export bills/receivables within the permissible statutory period by international factoring companies and other designated institutions, arranged in association with importers and/or  exporters.

Dr. Prashanta Kumar Banerjee of the Bangladesh Institute of Bank Management (BIBM) said the international factoring deal demonstrates the benefits of trade financing without the need for security or the complexities of letters of credit and expressed hope that others will follow Prime Bank’s initiative to boost Bangladesh’s exports.

Shams A. Muhaimin of Prime Bank added that the credit coverage model mitigates default risks for exporters who are often uninformed about a buyer ’s credit information due to limited access.