Baimuazzal (Export)-Export Financing by Islami Bank
Baimuazzal (Export)-Export Financing by Islami Bank: It is a contract in which a client wishing to purchase raw materials, finished goods, commodities, spares, machinery, equipments or any other goods for request of the bank to procure the items and sell them to him at a price payable at a future date in lumpsum or in installments.
– It is a credit sale. Ownership and possession of the goods is transferred by the bank to the client before receipt of the sale price.
– The sale price of the goods is payable by the client at a specified future date.
– Documentation:
1. D. P. Note.
2. D. P. Note Delivery Letter.
3. Baimuazzal Agreement.
4. Letter of Hypothecation.
Baimuazzal (Export)-Export Financing by Islami Bank
Accounting:
Dr. Baim Investment A/C.
Cr. Payment order A/C favouring seller of the goods.
Cr. Profit Receivable A/C.
Dr. Party’s A/C.
Cr. BAIM Investment A/C.
Cr. Profit Receivable A/C Monthly product basis.
Cr. Income A/C.
Insurance:
Ask the client to obtain an insurance policy equal to the sale price of the goods.
On behalf of the Readymade Garments Industries client, open deferred payment L/C for import of fabrics and other accessories under Back to Back arrangement on the understanding that the importers will arrange payment on or before the due date by the repatriation of proceeds of exports of their products. In some case, they cannot execute exports in time resulting in their failure to repatriate export proceeds to make import payment of its maturity. But the bank in order to keep its commitments has to pay on due date irrespective of relative export proceeds realized or not. Such overdue import payment is to be made by purchase of foreign currency from WES/SEM and the importers will have to arrange for the same.
On failure of the party to arrange import payment on or before the maturity date, the branch will effect the remittance by purchasing the required foreign currency at SEM rate by debit to Bai-Muazzal WES Bills A/c giving effect to the relevant agreement under intimation to the clients of the equivalent taka and due date for the repayment.
Then the branch will approach the Bangladesh Bank for their post facto approval along-with the following documents/papers:
1. Party’s letter addressed to NBR.
2. Bill of Entry (exchange control copy).
3. Export L/C copy.
4. Back to Back L/C copy.
5. Proforma Invoice.
6. The position of the goods.
The branches will need vigorous follow-up for recovery of the bank’s dues within due date of the agreement positively. In case of the party’s failure to repay the bank dues as per the agreement, the branch will arrange for disposal of the stock after obtaining the necessary clearance from the competent Govt. Agencies and Head Office also.
The branch will submit a monthly statement of outstanding Ba-Muazzal WES bills as per Head Office proforma.
Accounting procedure of the Bai-Muazzal WES Bill Investment (Export):
Dr. FC. Deposit (WES Fund held) A/C. F.C. Voucher.
Cr. GB General A/C Head Office. ID.
Dr. Bai-Muazzal WES (Bills) A/c. Tk. Voucher
Cr. WES Fund Purchase A/C
Cr. F.C.C. A/C
Cr. Telex Recovery A/C
Cr. Commission A/C
Cr. P & T A/C
Cr. Investment Income A/C.
Documents Requirement
1. Charge document.
2. Undertaking to arrange foreign currency for payment.
3. Agreement for the sale of goods under Bai-Muazzal.
Post-shipment Export Financing under L/C
Export credit means any credit provided by an institution to an exporter in the form of packing credit or post-shipment credit.
Packing credit means any loan or advance granted or any other credit provided by an institution to an exporter for financing the purchase, processing or packing of goods on the basis of L/C.
Post-shipment credit means any loan or advance granted or any other credit provided by an institution to an exporter of goods from Bangladesh from the date of extending the credit after shipment of the goods to the date of realization of the export proceeds and includes any loan or advance granted to an exporter, in consideration of, or on the security of, any duty draw-back or any cash payment by way of incentive.
The following incentives are provided to the exporters:
a) Interest rate: The concessional interest rate of export credit for traditional & non-traditional items.
b) The extent of Export Credit:
Commercial banks provide export credit to the extent of 90% of the value of confirmed and irrevocable L/C or of the firm’s sales contract.
c) Credit to first-time applicants:
Commercial bank will not refuse any application for export credit received for the first time.
d) Back to Back L/C:
All authorized dealers (Commercial Banks) can establish L/C on a back to back basis against lien valid export L/C for the importation of raw materials and other accessories from abroad or from inland for readymade garments, specialized textiles and hosiery products etc.
2. Substitute Benefit:
From 31st March 1990, the arrangement for cash premium to the exporters under substitute benefit scheme has been replaced by export performance benefit (XPB), a system under which Bangladesh Bank shall reimburse a premium in cash to the exporter’s bank in favour of the party.
This scheme has been introduced against customs duty or duty drawback, exporters will get this benefit only for export-oriented local waving/knitting manufacturer. The rate of cash premium is 5% on for value.
The following manufacturers will get the benefit against export as prescribed by Bangladesh Bank:
a) Waving cloth, Knit cloth, Hosiery fabrics, Gray cloth, Printed cloth, Drying cloth, Gramin cheeck, Handloom fabrics and Reshmi silk cloth and exported readymade garments which have been made local fabrics (Fabrics producer and garment exporter are to be same).
b) Local Manufacturing Toel, Bed sheet, Bed Cover, other related items, Screen cloth, Terrybag and Shocks etc.
c) Fabrics producer and garments exporter must be same industry, and export the garments by the use of own produced fabrics. This type of composite unit shall be entitled to get this benefit.
3. Duty Draw Back:
An exporter of manufactured products is entitled to draw back the value of the customs duties, sales tax etc,; already paid on the importation of raw materials used in the production or manufacture of the export products.
There are three methods:
i) Draw back at actual
ii) national payment of duty
iii) Draw back at flat rate for realizing draw backs.
4. Export Credit Guarantee Scheme (E.C.G):
The export credit guarantee wing of the Sadharan Bima Corporation (SBC) provides the guarantee to importers and exporters the overseas commercial and political risks respectively, currently three types of guarantee e.g.
a) The Export Finance Guarantee (Pre-shipment).
b) The Export Finance Guarantee (Post-shipment).
c) The Comprehensive Guarantee.
While the first two types of guarantee are expended to the bankers. The extent of guarantee covers 75% of this loss. The third one is extended directly to the exporters.
Comprehensive Guarantee:
The Guarantee is extended to protect the exporters against overseas risk such as:
i) Commercial Risks
ii) Political Risks
The Guarantee covers 85% of loss caused by commercial risks and 95% of the loss caused by political risks.
5. Concessional Rate of Import Duty:
i) Capital Machinery: Capital Machinery for export-oriented industries is allowed to the imported at a concessional rate of 2 ½% import duty.
ii) Spare parts: Draw back of import duties and sales tax paid in excess of 2 1/2% on the importation export oriented industries, provided that such part is not produced within the country.
6. Income Tax Rebate:
Exporters of various categories are entitled to an income tax rebate, varying in percentage, depending on their export performance, as fixed by the NBR from time to time.
7. Rebate on Insurance Premium:
Special rates are allowed to export-oriented industries (Non-traditional items) in respect of their premium payments for fire and marine insurance.
8. Freight Rebate:
Special inducement and promotional freight rates are provided to exporters by Bangladesh Biman Airlines and Bangladesh Shipping Corporation.
9. Export Incentives for “Deemed Exports”:
Locally produced materials are used as direct import for the manufacture of export products or for products supplied against international tender for local project procurement in foreign currency, are regarded as “Deemed Exports” and qualify for all the export incentives and facilities, such as duty draw back, substitute benefit etc. that are extended to direct exporters.
10. Retention Quota:
Retention Quota for merchandise exporters readymade garments is 10% of repatriate FOB value of their exports in F.C. A/C. Fund from their can be used to meet bonafide business expenditure such as business visit abroad participation in export fair, seminars, import of raw materials, machinery and spares and set up offices abroad without prior permission from Bangladesh Bank.
11. Monitoring of Export Credit:
A special credit all has been created in the Bangladesh Bank to monitor and supervise the operation of financing. A special (Credit) team has also been set up in each commercial bank to deal with export credit needs.
Baimuazzal (Export)-Export Financing by Islami Bank