Import and Export Payment Methods World Bank regulates imports and exports in between various countries. It sets certain mandatory guidelines to follow for easing payment procedures via IBRD and IDA.
World Bank An international creditor to developing countries It’s Goal: Making the world free of poverty.
Three Prime Roles: Promote foreign investment Promote international trade Provide facility of capital investment
Two Branches of World Bank International Bank of Reconstruction & Development (IBRD) •
Provides loans to under-developing countries’ middle-income group
International Development Association (IDA) •
Lends money to the poorest countries as grants and credits at no interest rat e
Methods of Finance Four methods are used in import and export business: 1.
Banker’s Acceptance (BA)
2.
Working Capital Financing
3.
Medium-Term Capital Goods Financing
4.
Countertrade
Role of Banker’s Acceptance (B A) For making payment to the importer. Time bound draft Importer’s bank clear it at maturity date BA can be encashed in the money market by selling it. Acceptor bank charges all-in-rate, including discount rate and commission.
Role of Working Capital Financing It is short terms loan. Helps in moving on working capital Done by purchasing inventory until it gets converted in cash
Role of Medium-Term Capital Go ods Financing It is a promissory note. Issued for 3 to 7 years. Issued to pay for importing capital goods Exporter sells it to banks without delay.
Role of Countertrade Interlinking financial transaction
It links export of goods to import of goods from the same country
Types: Barter, Compensation and Counterpurchase Occurs between the government and the multinational traders
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