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Trade Finance

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This is a short-term facility through which the Bank meets short term liquidity requirements of importers and exporters. Through the Trade Finance Facility, the Bank will be actively involved in promoting trade finance activities and is done through the following interventions:

  1. Inward (imports) and Outward (Exports) Documentary facilities
  2. Commodity Financing
  3. Letters of Credit:
  4. Invoice Discounting
  5. Bank Guarantees

Trade Finance Objectives

The mandate of DBZ is to contribute to the development of economically viable enterprises in Zambia. The broad objectives are to select projects that contribute towards:

  • Foreign exchange savings and / or earnings.
  • Development of local technology and of manpower skills.
  • Creation and expansion of permanent employment.
  • Use of local raw materials.
  • Development of a robust indigenous Private Sector.

Terms and Conditions of the Facility

(terms subject to change without notice)

A. EXPORT FINANCING FACILITY

Using the Export Financing Facility in Kwacha or foreign currency, the Bank is able to meet an exporter’s temporary liquidity requirements pending the receipt of payment.

The facility could be used for the following purposes;

  • Raw materials that may be required to fulfill export orders.
  • Processing of commodities.
  • Purchasing packaging materials for exports.
  • Meeting freight charges of commodities.
  • Financing a local purchase of exportable commodities.

B. IMPORT FINANCING FACILITY

The Bank will finance an importer’s working capital requirement using this facility in Kwacha for the following purposes :

  • Warehousing costs such as bond warehousing, general warehousing of stocks I imported commodities.
  • Transport costs from source to local market.
  • Clearing costs of goods imported, this would normally include VAT, duty etc.
  • Purchase of inputs, spares and raw materials to be used in the manufacture of finished goods.

C. INVOICE AND BILL DISCOUNTING

The Bank’s bill discounting facility serves to provide liquidity to an exporter by advancing the exporter a portion of the face value of the trade bill drawn by the exporter accepted by the buyer and endorsed to the Bank. The discount covers interest costs and all bills are purchased with recourse to the exporter.

D. SECURITY

The Bank will require Trade Finance transactions to be covered by one or a combination of the following security:

  1. Assignment of proceeds of underlying commodities.
  2. Bank Guarantee.
  3. Cash cover.
  4. First legal charge on fixed assets.
  5. Quasi cash instruments such as Treasury Bills, GRZ Bonds, quoted shares etc.

E. CONTINGENT LIABILITY INSTRUMENTS

The Bank will provide additional support to businesses in the form of bonds and guarantees. The main type of guarantees and bonds the Bank will issue are as follows:

  • Tender Guarantee / Bid Bonds.
  • Performance Guarantees.
  • Advance payment Guarantees.
  • Retention Guarantees.
  • Maintenance Guarantees.
  • Custom Bonds.

Contingent liability instruments will also be used by the Bank to support transactions involving construction such as roads, buildings and manufacturing projects.

F. ADMINISTRATION OF TRADE FINANCE FACILITY

The trade finance facilities will be administered in the following manner:

  1. AMOUNT
    The minimum amount to be extended under the Trade finance facility will be varied at the discretion of the Bank. Currently the Bank will consider applications for trade financing with a minimum value of $250, 000 or Kwacha equivalent.
  2. TENURE / PERIOD
    The Bank’s trade finance facilities are for short term periods which range from a week to 180 days.
  3. CHARGES
    a. Interest on foreign currency facilities will be based on Cost of funds plus a margin of up to 5%.
    b. Floating rate on Bank of Zambia policy rate with a margin of up to 5%.
    c. Appraisal fee of 1 %, payable upfront.
    d. Facility fee of 1% of the facility amount payable on approval. A commitment fee of 3% on undrawn balance.