Demand guarantees – payment and risk mitigation instruments – are playing a vital role in facilitating international trade finance by mitigating risks in businesses, said Mahbubur Rahman, president of the International Chamber of Commerce (ICC) Bangladesh.
While addressing the inauguration of a two-day virtual workshop for bankers on Friday, he also cited the Global Trade Finance Survey 2020 and said nearly 25% of global trade was financed through guarantees and standby letters of credit.
The ICC Bangladesh has organised the workshop styled "International Standard Demand Guarantee Practice (ISDGP)" to facilitate smooth international trade finance.
In the wake of uncertainty created by the Covid-19 pandemic, guarantees have become more relevant than before as these instruments are being designed for the purpose of providing beneficiaries comfort in such difficult circumstances, observed Mahbubur Rahman.
Uniform Rules for Demand Guarantees or URDG has become an unquestionable reference for guarantees in many countries and there is a huge scope for increasing URDG use in Bangladesh, he added.
The ICC Bangladesh president also said, "We are now discussing with the Asian Development Bank and the Bangladesh Bank to launch joint programmes for further development of open account transaction systems as well as to organise workshops for bankers and exporters to raise awareness about the operations of open account transactions."
Mentioning that international trade is now under different challenges due to the pandemic and climate change, Muhammad A (Rumee) Ali, chairman of ICC Bangladesh Banking Commission & Chief Executive Officer of Bangladesh International Arbitration Centre (BIAC), said, "In this situation, we have to maintain the standard trade finance."
The ICC Banking Commission approved the new ISDGP on 31 March this year.
This new ICC publication is a statement of best practices that supplements the URDG by identifying and recording best practices in relation to the URDG and beyond.
Including officials from 21 commercial banks and representatives from the Bangladesh Institute of Bank Management (BIBM), a total 67 people participated in the workshop.
KM Lutfor Rahman, senior manager and head of Import Settlement & OBU, Trade Operations at BRAC Bank Limited, conducted the workshop.