Monday, February 2, 2015

Trade Finance

Introduction

Trade Finance refers to financing of trade, both, domestic or international. Trade Finance helps in expanding business across borders and in connecting to businesses not familiar via a direct relationship.

Stakeholders

Trade Finance involves the following stake holders:
1.       Seller – Refers to producer of goods or services.
2.       Seller Bank/Financial Institution
3.       Buyer – Refers to purchaser of goods or services.
4.       Buyer Bank/Financial Institution

Requirement of Trade Finance

Trade Financing is required as Sellers/Buyers want to trade on various terms and condition (related to payment and procurement of products). Few of them are as follows:
·         Payment to seller only after the product is shipped/received by the buyer.
·         Seller ensures once the product is delivered, payment is guaranteed.
·         Financing the transaction cost to improve liquidity.
·         Covering the risks involved.
·         Exporters of goods and services many a times lack the support of the importing country’s establishment ex: banks/legal framework and the presence of seller in it.
·         Similarly, importers lack the support of establishment at exporters’ country. The importer might have problems routing the funds for transactions to exporters’ country.

 

Business Model

Business Model can be summarized in the following steps:
1.       Buyer/Seller presents itself to counterpart with a recommendation from a Bank/Financial Institution.
2.       Seller and Buyer enters into an agreement and starts the trade relationship.
3.       Buyer places an order.
4.       Seller ships the product.
5.       Seller produces relevant proof for product shipping, generally termed as “Bill of Lading”.
6.       Buyer Bank transfers the fund to seller and provides time to buyer for payment refund.
7.       Buyer Bank obtains a commission on the fund transferred for the duration it is not refunded.
8.       Seller Bank might obtains fees for the network services provided.

Banking/Financial Institutions provides the following methods for “facilitating transaction”:


  1.  Letter of credit: It is an undertaking/promise given by a Bank/Financial Institute on behalf of the Buyer/Importer to the Seller/Exporter, that, if the Seller/Exporter presents the complying documents to the Buyer's designated Bank/Financial Institute as specified by the Buyer/Importer in the Purchase Agreement then the Buyer's Bank/Financial Institute will make payment to the Seller/Exporter.
  2. Bank guarantee: It is an undertaking/promise given by a Bank on behalf of the Applicant and in favor of the Beneficiary. Whereas, the Bank has agreed and undertakes that, if the Applicant failed to fulfill his obligations either Financial or Performance as per the Agreement made between the Applicant and the Beneficiary, then the Guarantor Bank on behalf of the Applicant will make payment of the guarantee amount to the Beneficiary upon receipt of a demand or claim from the Beneficiary.
The problems of exporters/importers are generally resolved with the help of Financial Institutions/Banks which can act as guarantor as well as facilitator for the transactions.

Banks/Financial Institutions in return of the services provided charge fees to the seller and buyer.
Services offered by Financial Institutions can be as follows:
1.       Financing the Transactions. – Seller Bank or Buyer Bank, or both jointly can finance the deal between buyer and seller.
2.       Risk Coverage: Covering the risk during transit in return of a premium charged.
3.       Providing Network Services: Banks can extend their network/coverage to Seller/Buyer for making new relationships between seller and buyer.
4.       Transferring of funds globally using SWIFT (Society for Worldwide Interbank Financial Telecommunication).

Summary


Trade finance is of vital importance to the global economy, with the World Trade Organization estimating that 80 to 90% of global trade is reliant on this method of financing.

Thursday, July 30, 2009

Does any agency holds importance to any government in India?

Does our government make any agency just to make another arm to its functioning whether it be an independent committee, commission or a permanent agency like CBI.

Are they made to work as and when the government wants. Why the following happened:
1. Quattrochi was given a clean chit by CBI 3 days before Congress government was to end.
2. Why it happened that the report of CAG which states that there is a misappropriation of funds worth 50K crore (CAG in 2008 report).
3. Why the report of inclusion of top cops in Mumbai 26/11 terrorist attack has not been disclosed still to the people.
4. Why the defense deals are always a source of misappropriation of funds such as purchase of Gorbachov for 2 billion (CAG report 2009).
5. Pulses becoming costly day by day and government is not distributing the pulses imported (definitely a source of eating money)and letting it to be a waste. Why Sharad Pawar doesn't answer, it should be mandatory to give a reply to the issue, may be once the inquiry is done but should be mandatory.


The defense which is taking the maximum from our pockets, isn't it becoming more of a money eating machine for government?

A new rule should be implemented which makes it mandatory for the opposition party to show the failures of opponent party once the election comes. This will provide more transparency, even the opposition party should make once a session before filling for election to show that they acted truly like a sincere opposition to the other party.

Wednesday, June 24, 2009

Dignity of Women in India- An Irony

INDIA:

A country which led to epics (Ramayana) in order to maintain the dignity of the female of the family.

The country where women were given importance to such an extent that every nook and corner worships for a mother goddess, may it be Durga, Kaali or it may be Santoshi.

The country which has most of the rivers’ name as feminine to show that the growth of the “COUNTRY “ is the blessing of various mothers other than the one of an individual.

INDIA:

A country in which the mothers are victim of descendants of the worshippers of theirs’, for the sheer lust, which is day by day growing making mockery of the word “MOTHER”. There lies the dignity of female of family today.

A country where kids are born to see that their feminine counterparts being thrown in the nearby dustbin where the males have just pissed off. There lies the female dignity today.

A country where females are even not considered the symbol of growth of a “FAMILY” and burnt alive, what could be said about considering the same for a “COUNTRY”. This is dignified female of India.

Sunday, June 21, 2009

Is it the same world today?

I do remember the days,
when I used to be a frequent visitor to a friend’s house.
I do remember the days,
when every season has something to mark its beginning,
I do remember the days,
when every quarter has some occasion to celebrate.

But….

I don’t remember the years passed,
to visit a friend’s house frequently.
I don’t remember the years passed,
For which the seasons ever changed.
I don’t remember the days passed,
I got the occasion to celebrate.

Is it the same world today which I do remember till today,
Or it is the world in which I don’t remember even a single day?