Businesses in the Middle East and North Africa are continuing to shy away from open account trading according to Standard Chartered's managing director and head of transaction banking in the UAE.

In a recent interview with local media, Haytham Al Maayergi said corporates continue to favour safer instruments such as letters of credit (L/Cs) and bank guarantees.

Safer instruments

Many businesses shifted to L/Cs and bank guarantees or even pre-signed cheques in the wake of the 2008 financial crisis and continue to do so to secure timely payment, according to Al Maayergi.

He maintains that companies using these instruments experience slower cash flow, but the model apparently works well.

Regional differences

Secure payment methods are mainly used with counterparties in Asia, Africa and the Middle East, according to Al Maayergi.

He adds that open account terms are still used for trades with counterparties in the US and Europe.

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