The lending arm of the Islamic Development Bank (IDB) has reportedly provided another letter of credit (L/C) facility to Bangladesh Petroleum Corporation (BPC) to help it finance oil imports.

But the International Islamic Trade Finance Corporation (ITFC) is unlikely to provide the state-owned importer with the kind of additional L/C facility it provided last year.

No additional facility

In 2012, the ITFC provided BPC with an additional L/C facility to import petroleum products worth around US$500 million.

This year, the ITFC has agreed to lend BPC up to US$2.2 billion, but is reportedly not inclined to bail out the importer as it did last year when Bangladesh was experiencing severe fuel shortages.

L/C commissions

The ITFC is charging a commission of 0.16 per cent on L/Cs for BPC this year, which is similar to the 2012 rate.

This is said to be substantially less that the 0.4 per cent commission charged by Bangladesh's state-owned commercial banks.

The ITFC is the only foreign financial institution allowed by the Bangladeshi government to provide an L/C facility for imports by state-owned entities.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.