HSBC gets regulatory green light for first of all receivables finance deal in Bangladesh
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HSBC has carried out the first receivables finance transaction in Bangladesh, following the country’s regulator approved the application of the instrument.
In a circular published on June 30, Bangladesh Bank says it'll nowadays allow “export under open account credit conditions against payment undertaking or payment risk coverage with the choice of early repayment arrangement on a non-recourse basis”, with the margin on early repayment set at no greater than the six-month US dollar Libor plus 3.5% annually.
The HSBC programme will allow ready-made garment exporter M&J Group, which supplies clothing retailers including H&M, Gap and Zara, to get payment after invoice acceptance, down from 90 days previously, beneath the buyer’s default risk coverage from HSBC. The brand of the buyer is not disclosed.
“We are extremely pleased to spouse with HSBC upon this first transaction beneath the proposition which will help us to obtain the gain at both ends by catering to clients’ increased credit terms but with early payment on a non-recourse basis,” says Salahuddin Ahmed, managing director of M&J Group.
The garment industry has been hard hit by the Covid-19 crisis. According to a recently available report by consulting organization McKinsey, revenues for the sector will stop by around 30% in 2020 because of dramatic falls in product sales. Bangladesh, the world’s second-largest garment exporter, features been particularly impacted.
Allowing for the utilization of receivables finance will allow the country’s exporters to search out new market segments and unlock much-needed operating capital, says Ajay Sharma, regional mind of global trade and receivables financing, Asia Pacific, in HSBC. He tells GTR: “This opens up a fascinating market and the probability to replace letters of credit rating with open account, by using a financing remedy. This will redefine what we are able to do in that industry for our clients, permitting them to extend the quantity of clients and counterparties they are able to deal with. Receivables financing is yet another tool for our consumers to have in their selling armoury and for that reason helps them do even more business.”
The approach by the regulator in Bangladesh to permit the utilization of receivables finance employs engagement with the private sector, says Sharma. “Our original engagement with the regulator in Bangladesh was 3 years ago,” he says. “We presented guidelines of what goes on in other markets. That is something we do atlanta divorce attorneys market, and not only necessarily with regard to receivables finance.”
HSBC isn't the only entity to come to be engaging with regulators across Asia to start the utilization of working capital optimisation tools. This week, the Asian Production Bank (ADB) said it strategies to utilize governments to put into action regulatory changes to be able to get over barriers to the utilization of supply chain finance over the markets in which it operates.
The next industry to watch is likely to be India, according to HSBC’s Sharma, who expects to see “some progress” in the coming weeks around that country’s regulatory acceptance of receivables finance for its exporters.
Source: https://www.gtreview.com
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