A senior Dubai banker is reporting a strong comeback for letters of credit (L/Cs) and other structured trade finance solutions.

Commenting on the results of HSBC's first ever Trade Confidence Survey, the bank's regional head of trade and supply chain, Kersi Patel, said the comeback is due to traders seeking increased security in international transactions.

Concerns

"More than ever, suppliers are anxious about getting paid on time - or getting paid at all. Buyers are less likely to make payments before they are certain that all terms in the trade agreement are met," Patel told local media.

"While they have been a preferred way of securing trade receivables in the region, structured trade finance solutions like standby credits, documentary credits, confirmations and avalisation have now made a strong comeback across many parts of the world due to the increased security they provide to buyers and sellers," he added.

New index

The new HSBC Trade Confidence Index surveyed small- through to moderately large-sized businesses in China, India, Australia, Vietnam, UAE, Hong Kong and Singapore.

When asked what actions they will take to protect themselves from risk of non-payment by buyers, 27 per cent of UAE respondents, 16 per cent of survey participants from Singapore and 10 per cent of Hong Kong respondents identified greater use of secured trade finance products as their most preferred strategy.

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