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Huge milestone achieved in Bangladesh with the passage of the new policy on International Factoring
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On 30 June 2020, the Foreign Exchange Policy Department of Bangladesh Bank published the FE Circular No 25 that authorizes International Factoring. FCI has assisted the Bangladesh Bank for the development of this policy. It also recognizes the role of FCI and other similar organisations.

The policy includes the easy access to finance by exporters: Authorized Dealers (ADs) may allow exporters to ship goods on sales contracts under open account credit terms within the statutory period, if otherwise not extended, from the date of shipment, subject to compliance with the following instructions:

(a) Exports shall be executed against payment undertaking/payment risk coverage for settlement of export bills/receivables within the permissible statutory period by international factoring companies/foreign banks/foreign financial institutions/trade financiers/insurance entities (hereinafter referred to as designated institutions) arranged in association with importers and/or exporters.

(b) Payment undertaking/payment risk coverage by designated institutions abroad shall be, in case of default by importers, received in such a way so as to be ensured of payment on priority basis in accordance with appropriate underlying arrangements for settlement on the basis of physical/electronic presentation of export invoices/bills/documents.

(c) Payment undertaking/payment risk coverage from designated institutions abroad may contain option for early payment arrangement before maturity against the relative export bills/receivables. Early payment shall be arranged on non-recourse basis from designated institutions or designated financiers based on the payment undertaking/payment risk coverage.

ADs may, for technical support, consult with the Guidelines on International Factoring prepared by the technical committee on factoring. Other relevant instructions pertaining to export transactions shall remain unchanged.

FCI is delighted to see the Central bank authorize the use of international factoring.  We anticipate Bangladesh becoming a significant export factoring market being one of the largest exports of wearing apparel in the world today.

The complete policy can be found here.