World Bank plays role as an admin and controls imports & exports among various countries. It sets certain required rules to be guided by facilitating payment procedures by means of IBRD and IDA.These are the two branches that control the transactions of funds very efficiently without causing any tiff between the importer and the exporters.
World Bank regulates imports and
exports in between various countries. It
sets certain mandatory guidelines to
follow for easing payment procedures
via IBRD and IDA.
Import and Export
An international creditor to developing countries
It’s Goal: Making the world free of poverty.
Three Prime Roles:
Promote foreign investment
Promote international trade
Provide facility of capital investment
Two Branches of World Bank
International Bank of Reconstruction & Development (IBRD)
• Provides loans to under-developing countries’ middle-income group
International Development Association (IDA)
• Lends money to the poorest countries as grants and credits at no interest rate
Four methods are used in import and export business:
1. Banker’s Acceptance (BA)
2. Working Capital Financing
3. Medium-Term Capital Goods Financing
Methods of Finance
Role of Banker’s Acceptance (BA)
For making payment to the importer.
Time bound draft
Importer’s bank clear it at maturity date
BA can be encashed in the money market by selling it.
Acceptor bank charges all-in-rate, including discount rate and commission.
It is short terms loan.
Helps in moving on working capital
Done by purchasing inventory until it gets converted in cash
Role of Working Capital Financing
Role of Medium-Term Capital
It is a promissory note.
Issued for 3 to 7 years.
Issued to pay for importing capital goods
Exporter sells it to banks without delay.
Interlinking financial transaction
It links export of goods to import of goods from the same country
Types: Barter, Compensation and Counterpurchase
Occurs between the government and the multinational traders
Role of Countertrade
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