Introduction
The International Islamic Trade Finance Corporation (ITFC) has launched a new trade finance instrument that helps small businesses in reducing trade risks
The new instrument is basically a letter of credit (LC) confirmation that helps businesses that are located in the Islamic Development Bank (IsDB) member countries
This new instrument ensures that the exporter of a product gets a payment guarantee from a second bank. This protects the exporter against any issuing bank risk as well as country risk
This instrument also makes sure that the supply of goods and services remains steady under all circumstances
This blog discusses the key aspects of the new instrument and analyses how it can help smaller businesses
ITFC launches letter of credit confirmation product
The new product focuses on private sector entities, especially small and medium-sized businesses
These types of businesses face major risks related to international trade due to their relatively small size and limited availability of resources
In case of any payment dispute, these businesses can face serious challenges related to cash flow, vendor payments, and even struggle to keep their critical processes running
ITFC wants to eliminate these issues by ensuring that these companies get paid in all circumstances
This product ensures that the payment is secured from two trade finance institutions. Such multi-dimensional security helps the exporters in minimising risks related to trade
This new instrument could prove to be extremely useful for small and medium business because they will feel more secure in their overseas transactions
In addition, the launch of these products could also prove to be beneficial for the overall trade finance industry as it will help in building the confidence of exporters around the world
Finally, this new launch will also help the trade industry in recovering from the jolt that has been given to it by the coronavirus crisis. This new launch shows that trade finance institutions are committed to new product development in order to grow their business despite the global crisis
Conclusion
To conclude, this new launch could have a positive impact on the trade finance industry. In case your organisation is unclear about any aspects of business, you can always reach out to the experts. Institutions such as Euro Exim Bank offer customised support to traders in the form of financial instruments and bespoke trade advisory services. Euro Exim Bank offers financial instruments such as Bank Guarantees and Letters of Credit (LCs). Further information about Euro Exim Bank and its key product offerings is available here.
