Business leaders complain of high cost of international factoring

Business leaders in Bangladesh have complained that they cannot avail of international factoring as the cost is very high. 

International factoring is the process of purchasing an invoice from an exporter in one country and collecting it later from his importer located in another country.

Discounts against import bills and international insurance costs are high. Besides, if the payment comes from a third country, they face problems in withdrawing the money. Also, although there is a policy on export factoring, it is becoming difficult to implement it because there is no policy of the central bank in the case of import factoring, said the businessmen at a Panel discussion and Certificate Award Ceremony of ICC Bangladesh Workshop on Factoring and Open Account for International Trade Finance held in the capital yesterday.

They said that the central bank must come forward to solve these problems otherwise traders will lose interest in international factoring.

The panel discussion was moderated by Muhammad A (Rumee) Ali and the keynote speaker was Ahmed Jamal, deputy governor of Bangladesh Bank.

In the keynote speech, Ahmed Jamal mentioned that Bangladesh Bank, after huge exercises, brought radical changes in foreign trade transactions. Given the ongoing situation due to the Covid-19 pandemic, the central bank extended policy supports to international trade through various efforts.

"Even during the pandemic, we were visited by several international financing institutes, which indicates that we are growing despite different odds. I am sure external financiers will be benefited from trade transactions in Bangladesh," he added.

He requested the exporters use the policy to protect their payments.

ICC Bangladesh Vice President AK Azad said open account and international factoring are being adopted by most countries for better and smooth trade finance. Factoring in South Asia as a region in general and Bangladesh, in particular, has still been very limited whereas factoring in most other regions has exploded with the shift towards open account trade.

"Bangladesh is promoting digitization to make Smart Bangladesh. Therefore, we would suggest appropriate policy changes should be made by Bangladesh Bank to digitize international trade," he added.

He mentioned that Bangladesh Garment Manufacturers and Exporters Association has targeted to export $100 billion worth of garment items by 2030. Besides, there is immense potential for Bangladesh to increase its export of leather goods, pharmaceuticals, plastic products and other products.

Md Akhtaruzzaman, director general of Bangladesh Institute of Bank Management, and Peter Mourly, secretary general of Factor Chain International, the Netherlands, addressed the inaugural session and ICC Bangladesh Secretary General Ataur Rahman delivered the welcome address.

A total of 131 participants, including officials of the Ministry of Commerce and Bangladesh Bank, 96 from 31 banks and 32 from 24 companies, attended the day-long workshop.