Business banking unit4

1. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
Understanding the Business Customer
Understanding the Customer’s Business
Assessing Customer Needs
Lending in Foreign Business Transactions
Financing Property Developers and Contractors
Financing Agricultural Projects
MODULE COVERAGE
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Alternative Sources of Business Finance

2. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
• In foreign exchange transactions, forex denominated
lending is suitable. The customer avoids exposure to foreign
exchange risks and the bank should be more comfortable
lending in the currency of the customer’s income.
• For foreign exchange transactions like the purchase of raw
materials or additional equipment for a business that
basically earns/sells in local currency, it is more prudent to
lend in local currency (This is to mitigate foreign exchange
volatility).
• The amount of foreign currency disbursed to the
customer’s supplier is translated into the local currency on
the date of the transfer and terms, conditions and pricing
of the local currency loans applied to the loan.
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3. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
• For the forex earning business, the financing can be done
onshore or offshore. Onshore financing is the kind that is
done by the banks that exist within the country. Offshore
financing, on the other hand, refers to financing by banks
outside the country, which do not have branches or business
premises in the country.
A typical foreign exchange denominated loan is;
1. Contracted for payment of suppliers outside the country
2. Advanced with built-in foreign exchange risk being borne
by the borrower – they are payable in the disbursement
currency
3. Lower in interest rate than UGX loans
4. More difficult to get than UGX loans
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