Export Development Fund (EDF)
Export Development Fund (EDF) is a special credit window created by Bangladesh Bank to provide short-term finance in foreign currency for import of raw materials by opening L/C at sight by the export oriented garment industries.
At the request of Bangladesh Government with a view to developing its export, the International Development Organization (IDA) established an export development fund in Bangladesh Bank (Loan – 2000 BD). In this respect a treaty was signed with IDA on 26 April 1989 and the project started its activity from October’ 89.
Initial Proposed fund for 31.20 mUS$ was arranged as under:
i. IDA – 25.00 mUS$
ii. Bangladesh Govt. – 5.00 mUS$
iii. US Aid – 1.20 mUS$
Objectives:
• To help import financing for the exporters of non-traditional items, especially where high value addition is maintained.
• To grow confidence of foreign suppliers.
• To expedite high value added export where import is made under BTB LC under bonded warehouse system.
Features
1. Limit US$500,000.00 for single import bill.
2. Aggregated amount US$20,00,000.00 to single importer at the time of disbursement.
3. Interest LIBOR + 1% and 10% for interim period
4. To be refunded within 180 days from the date of receipt of fund from Bangladesh Bank (may be extended to 270 days for special case)
Procedures:
1.Intimation to Bangladesh Bank:
• At the time of opening EDF BTB LC, intimation in a prescribed form stating details of LC is given to Bangladesh Bank through International Division.
• The branch will claim for disbursement of EDF sub-loan immediately after receipt of Negotiated import bills complying credit terms from the negotiating bank abroad.
• The branch will submit following returns/statements in respect of L/Cs opened under EDF:
L/C opening statement under EDF daily
Monthly statement of L/Cs opened under EDF (within 7 days of month following the month to which it relates)
At the time of opening LC the following voucher are passed:
Dr. Customers liability on EDF LC ( @ B.C. Selling)
Cr. Bankers liability on EDF LC ( @ B.C. Selling)
Dr. Customer A/c
Cr. Income A/c commission, charges, etc.
2.Lodgement of Documents:
After receiving credit conform negotiated documents they are lodged and reversal voucher of LC liability is passed.
Dr. Banker’s liability on EDF LC ( @ B.C. Selling)
Cr. Customer liability on EDF LC ( @ B.C. Selling)
3.Payment of EDF LC:
Step-1
After lodgment of import bill, payment to the negotiating bank is settled by creating EDF Loan. then vouchers are passed as follows:
Dr. PAD EDF Loan (@ OD sight)
Cr. General A/C – ID, Head Office (IBCA)
A payment instruction is given to the bank through which payment will be settled.
At the same time requisition for fund is forwarded to Bangladesh Bank through ID.
Step-2
International Division, after getting requisition of other branches, forward an accumulated requisition to Bangladesh Bank.
Step-3
Getting fund from Bangladesh Bank, ID credit the same to branch by IBCA.
Then the branches respond IBCA as follows:
Dr. General A/C – ID Head office (Responding)
Cr. FC Held EDF Loan
Step-4
When export is done and proceeds are realized then the EDF Loan account is adjusted and fund is returned as follows:
Dr. FC Held EDF
Cr. EDF Loan A/C
Step-5
Return of fund:
Dr. FC Held account for BTB payment (Bill value + intt. for interim + LIBOR
+1%) (@OD sight export)
Cr. MBL General A/C (IBCA on Bangladesh Bank account)
(with interest @ LIBOR rate)
Cr. MBL General Account on Nostro (for interest amount)
Dr. MBL General Account on Nostro (for interest amount)
Cr. I/A interest on EDF
Cr. I/A Exchange gain
Example
Bill amount :US$50,000..00
Bill payment date : 14.05.2008 (EDF Loan creation date)
Fund received date : 27.05.08
EDF adjustment date : 12.11.08
Calculation
Bill Amount 50,000.00
Intt. for 13 days @ 10.00% 180.56
Intt. for 169 days @ 1% 234.72
Intt. f or 169 days @2.85% (LIBOR) 668.96
51,084.24
Vouchers:
Dr. FC Held BTB payment account
$51,084.24 @68.20 Tk.34,83,945.17
Cr. IBCA on B.Bank $50,000.00 @ 68.20 Tk.34,10,000.00
$668.96 @ 68.20 Tk. 45623.07
Tk.34,55,623.07
Cr. IBCA on AMEX NY (for sale of margin)
$415.28 (180.56+234.72) @ 68.20 Tk.28,322.10
Dr. IBDA $415.28 @ 68.25 Tk.28,342.86
Cr. Intt. on EDF Tk.28,322.10
Cr. I/A Exchange gain Tk. 20.76