World Bank regulates imports and ex-ports in between various countries. It sets certain mandatory guidelines to fol-low for easing payment procedures via IBRD and IDA.

Import and Export Payment Methods

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

World Bank

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

rate

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

Methods of Finance

Role of Banker’s Acceptance (BA)

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.

It is short terms loan.

Helps in moving on working capital

Done by purchasing inventory until it gets converted in cash

Role of Working Capital Financing

Role of Medium-Term Capital Goods 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.

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

Role of Countertrade

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