TRADE FINANCE FACILITY
Product Description   Trade finance is a short - term facility through which the Bank meets short-term liquidity requirements of importers and exporters. This is achieved through the following instruments: ·         Short term loans - local or foreign currency ·         Invoice and Bill discounting

1. Short Term Loans

Export Finance

Using the export finance facility, the Bank is able to meet an exporter’s temporal 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

Import Finance

The Bank finances an importer’s working capital requirement using the facility for the following purposes:

• Warehousing costs such as bond warehousing, general warehousing of stocks/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 material to be used in the manufacture of finished goods

2. Invoice and Bill Discounting

The Bank will advance the exporter a portion of the face value of the trade bill drawn by the exporter accepted by the buyer and endorsed by the Bank. The discount covers interest costs and all bills are purchased with recourse to the exporter.

Administration of the facility 

Amount

Currently the minimum amount that the Bank will consider is US$ 20,000 or the Kwacha equivalent. This amount will be reviewed from time to time.

Tenure / Period

This ranges from 7 days to 180 days.

Interest charge and fees

• Interest on foreign currency facilities will be based on the cost of funds plus a margin of up to 5%

• Interest on the local currency will be based on the 182 day treasury bill plus a margin of up to 10%

• Appraisal fee of 1% of facility amount, payable upfront

• Facility fee of 1% of the facility amount, payable on approval

• A commitment fee of 3% on undrawn balances after 90 days from the date of approval

Security

All transactions are to be secured by one or a combination of the following security:

• Assignment of proceeds of underlying commodities

• Bank guarantee

• Cash cover

• First legal charge on fixed assets

• Quasi cash instruments such as treasury bills, GRZ Bonds, quoted shares

• Debenture on company’s floating assets

• Directors’ personal guarantees.

(See application procedures and guidelines)