What is Trade Finance?
What is trade finance, what are TF methods, and what is the role of banks in trade finance?
X
Welcome to the Supply Chain and Quality Management forum. The topic being discussed here is: "What is Trade Finance?".
Sign up now to gain access. It's easy and 100% free.
Log in
| |
|
|
2 |
|
Sheryl
|
|
What is Trade Finance.
Trade Finance means "finance for trade". For any trade transaction there should be a Seller and a Buyer. Various intermediaries such as banks and other financial institutions facilitate their trade transactions by financing their trade / transactions.
Banks play a critical role in international trade by providing trade finance products that reduce the risk of exporting. This business is highly concentrated in a few large banks.
Two principal trade finance instruments are Letters of Credit and Documentary Collections. They are preferred for larger transactions, which indicates the existence of substantial fixed costs in the provision and use of these instruments. Letters of credit are employed the most for exports to countries with intermediate degrees of contract enforcement. Compared to documentary collections, they are used for riskier destinations.
Check out this paper for more information. I hope it will be helpful.
|
|
Log in
Translate
