Trade Finance

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BOA-KENYA offers a wide range of services that are specialized and structured to meet trade finance needs of our clients. Our strong regional presence and global network of international banks enables us unlock new business opportunities and facilitate growth through trade.

Documentary Letters of Credit & Guarantees

Documentary Letters of Credit enables us to undertake commitments on behalf of our clients by guaranteeing payments to their sellers subject to fulfillment of terms and conditions. The following are the payments options that can be accessed under this offering:

Import Letter of Credit


Product description:

  • Letters of Credit (L/Cs) are a long established mechanism by which banks facilitate international trade by providing short-term trade support.
  • A letter of credit is a written undertaking issued by a bank (the issuing bank) in favour of a beneficiary (exporter) at the request and in accordance with the instructions of an applicant (the importer), to pay the beneficiary a specified sum, against stipulated documents, provided that the terms and conditions of the L/C are complied with.
  • The issuing bank forwards the L/C to the beneficiary through another bank (the advising bank), normally domiciled in the beneficiary’s own country, which is authorized by the issuing bank to advise the beneficiary that an L/C has been issued in his favour.
  • The issuing bank undertakes a pivotal role in protecting the exporter from non-payment, whilst ensuring that the buyer receives the necessary documentation for import purposes.

 Target customers:

  • All businesses

 Eligibility:

  • Be a BOA KENYA customer
  • Have an approved credit line at BOA KENYA AND/OR 100% same currency cash covered

 Product features:

The documentary credit can take on many forms:

  • Irrevocable L/C:  Your customer’s bank (issuing bank) firmly commits to pay you on presentation of documents which are in accordance with what is specified at the credit opening. These documents are meant to prove the good running of the contract.  This type of credit guarantees the commercial risk but not the political risk (risk of non-transfer of funds).
  • Irrevocable and confirmed L/C(on request): the foreign bank commitment is added to BOA KENYA commitment, which had opened the documentary credit. The foreign bank confirms the credit; therefore the political risk is resolved.
  • Back to back L/C: used in international trade operations. It ensures the issuing of an import L/C by an export L/C related to the same operation.
  • Transferable L/C:  It can be transferred, in whole or a part, to a second beneficiary (real supplier of the service sold).
  • Revolving L/C: It is a credit that is renewed to its original amount, depending or not on a fixed frequency, and as many times than planned in the description of the base credit.

 Each documentary credit must clearly indicate if it is:

  • Payable at sight, or
  • By deferred payment, or
  • By acceptance of bills at fixed term, or
  • By negotiation.

 Current standard pricing:

Product Fee: As per bank’s standard tariff unless negotiated otherwise with client

Export Letters of Credit


Product description:

  • Letters of Credit (L/Cs) are a long established mechanism by which banks facilitate international trade by providing short-term trade support.
  • A letter of credit is a written undertaking issued by a bank (the issuing bank) in favour of a beneficiary (exporter) at the request and in accordance with the instructions of an applicant (the importer), to pay the beneficiary a specified sum, against stipulated documents, provided that the terms and conditions of the L/C are complied with.
  • The issuing bank forwards the L/C to the beneficiary through another bank (the advising bank), normally domiciled in the beneficiary’s own country, which is authorized by the issuing bank to advise the beneficiary that an L/C has been issued in his favour.
  • The issuing bank undertakes a pivotal role in protecting the exporter from non-payment, whilst ensuring that the buyer receives the necessary documentation for import purposes.

 Target customers:

  • All businesses

 Eligibility:

  • Be a BOA KENYA customer

 Product features:

The Documentary Letter of Credit can take on many forms:

  • Irrevocable L/C: Your customer’s bank (issuing bank) firmly commits to pay you on presentation of documents which are in accordance with what is specified at the credit opening. These documents are meant to prove the good running of the contract. This type of credit guarantees the commercial risk but not the political risk (risk of non-transfer of funds).
  • Irrevocable and confirmed L/C(on request): BOA KENYA commitment is added to the foreign bank commitment, which had opened the documentary credit. BOA KENYA confirms the credit; therefore the Kenyan exporter is protected from the risks of nonpayment or non-transfer.
  • Back to back L/C:used in international trade operations. It ensures the issuing of an import L/C by an export L/C related to the same operation.
  • Transferable L/C: It can be transferred, in whole or a part, to a second beneficiary (real supplier of the service sold).
  • Revolving L/C: It is a credit that is renewed to its original amount, depending or not on a fixed frequency, and as many times than planned in the description of the base credit.

Each Letter of Credit must clearly indicate if it is:

  • Payable at sight, or
  • By deferred payment, or
  • By acceptance of bills at fixed term, or
  • By negotiation.

Current standard pricing:

  • Product Fee: As per bank’s standard tariff unless negotiated otherwise with client
Guarantees


Product description:

  • A guarantee is an undertaking or collateral agreement where the bank agrees to be liable for the debt of a customer to a third party or beneficiary on default.
  • The instruments usually carry an undertaking on the part of the bank that if the customer defaults, the beneficiary will be refunded or compensated by the bank to the extent of its undertaking on the presentation of pre-determined documents. Also known as direct credit substitutes, the bank substitutes its credit for that of its customer when bonds, guarantees and indemnities are issued.
  • The instruments are contingent liabilities as they become due only at the occurrence of an event. The bank’s liability ceases only on return of original instruments issued by the bank and/or the receipt of a formal release by the beneficiary of obligations under the instrument at which time reversal entries are passed

Target customers:

All businesses

Eligibility:

  • Be a BOA KENYA Customer
  • Have an approved credit line at BOA KENYA AND/OR 100% same currency cash covered

Product features:

  • Performance Guarantees

This is an undertaking required by the contractee (contract employer) or a principal from a contractor as security for their performance. The bond usually states that the contractor has the ability to carry out the job. This is normally issued to cover the duration of the contract.

A performance bond may be on demand or conditional. Where it is on demand, the bank undertakes to pay the bond subject to a writtfen demand from the beneficiary irrespective of whether there has been default in the performance of the contract by the customer. Whereas a conditional bond provides that payment will be made subject to certain conditions; these conditions commonly call on the beneficiary to establish default before payment is made.

  • Advanced Payment Guarantees

This is a guarantee issued to enable contractors collect mobilization fees for contracts won. Here the bank becomes liable if after collection of the money, the contractor still fails to execute the project.

  • Retention Guarantee

This is an undertaking by the bank to the Contract Employer, which enables the contractor (the Bank’s client) collect the funds that ordinarily would have been withheld by the Contract Employer for a specified period to take care of any flaws on the project/contract executed

  • Bid Securities

A bond issued by the bank on behalf of a customer to qualify for bidding of a contract. This essentially guarantees that the customer will not pull out of the bidding process. It is issued to both local and foreign contractors who are customers or potential customers of BOA KENYA.

  • Immigration Bonds

A bond issued by the bank on behalf of a customer to expatriates/non-Kenyans against the cost that the government may incur in case the person is deported from Kenya. This essentially guarantees the conduct of the expatriate. Should one fail to be of good conduct, the bank undertakes to pay the cost of deportation/or the consequences of his or her bad conduct.

  • Customs Bonds

A bond issued by the bank on behalf of a customer to ensure that dutiable goods on which duty has not been paid do not get into the local market without duty being paid. If the goods find their way into the market, the bank will have to settle the duty payable. Custom bonds are given for goods in transit through the country or for those produced in duty free zones targeting the export markets.

Current standard pricing:

  • Product Fee : As per bank’s standard tariff unless negotiated otherwise with client
Standby Letters of Credit


Product description:

  • A Standby L/C is a conditional, irrevocable undertaking by the issuing bank to pay a specified sum of money to the beneficiary (i.e. the seller or exporter) against the documents called for by the L/C and within the L/C period of validity, in order to make payment on account of any indebtedness undertaken by the applicant (i.e. the buyer or importer) or on account of any default by the applicant in the performance of an obligation.
  • A standby L/C operates like a standard L/C, except that there is not always an underlying movement of goods and it is usually used to guarantee payment in the event of non-performance of the contract terms.
  • A standby L/C, thus acts as a back-up, or secondary means of payment, to other trade facilities. It is, however, recognized as a primary obligation of the issuing bank.
  • Standby L/Cs are often issued to support open account trading so that, if the buyer should fail to settle the amount owing in normal way, the seller will look to settlement under a standby L/C of which he is the beneficiary.

Target customers:

  • All businesses

Eligibility:

  • Be a BOA KENYA Customer
  • Have an approved credit line at BOA KENYA AND/OR 100% same currency cash covered

Product features:

  • The beneficiary is able to advance credit with the security that payment is guaranteed by the issuing bank in case of buyer default.
  • The applicant is able to obtain credit and import goods on an open account basis, thereby gaining control over the goods sooner.
  • The maintenance of standby L/C is low due to the rarity of such LCs ever being called

Current standard pricing:

Product Fee : As per bank’s standard tariff unless negotiated otherwise with client

Other Specialized Trade Finance Products

BOA-KENYA recognizes that every business has unique and specific needs which require specialized trade solutions to grow their business. We structure trade solutions that are relevant and aimed at adding value to our clients. These solutions will include but not limited to the following products:

Import Documentary Collections


Product Description:

  • Documentary collection is one of the payment method used in foreign trade transactions. International Chamber of Commerce has prescribed Uniform Rules for Collection (International Chamber of Commerce Publication no. 522)
  • A collection is a process whereby a bank acts on instructions given by the drawer:
    • Obtains acceptance and/or payment
    • Delivers commercial documents against acceptance and or payment
    • Delivers documents under some other stated conditions
    • Documentary Collections are a long established mechanism by which banks facilitate international trade by providing collection of payment trade support.
    • Documentary Collections are not commitments on the banks involved unless the remitting bank has requested collecting bank to avalize the bill of exchange in addition to the importers acceptance of the bill of exchange.
    • The remitting bank forwards the collection documents to the drawee through another bank (the collecting bank), normally domiciled in the drawee’s own country, which is authorized by the remitting bank to collect payment as per the collection instructions

 Target Customers:

  • All businesses

 Eligibility:

  • Be a BOA KENYA customer
  • Have an avalization credit line at BOA KENYA AND/OR 100% same currency cash covered in case of avalized bills

Product Features:

Terms of payments applied in documentary collections:

  • Release documents against payment (D/P) or Cash Against Documents (CAD)
  • Release documents against acceptance (D/A)
  • Documents against promissory note or documents against undertaking

Current Standard Pricing:

  • Product Fee: As per bank’s standard tariff
Export Documentary Collections


Product Description:

  • Documentary collection is one of the payment method used in foreign trade transactions. International Chamber of Commerce has prescribed Uniform Rules for Collection (International Chamber of Commerce Publication no. 522)
  • A collection is a process whereby a bank acts on instructions given by the drawer:
    • Obtains acceptance and/or payment
    • Delivers commercial documents against acceptance and or payment
    • Delivers documents under some other stated conditions
    • Documentary Collections are a long established mechanism by which banks facilitate international trade by providing collection of payment trade support.
    • Documentary Collections are not commitments on the banks involved unless the remitting bank has requested collecting bank to avalize the bill of exchange in addition to the importers acceptance of the bill of exchange.
    • The remitting bank forwards the collection documents to the drawee through another bank (the collecting bank), normally domiciled in the drawee’s own country, which is authorized by the remitting bank to collect payment as per the collection instructions

Target Customers:

  • All businesses

Eligibility:  

  • Be a BOA KENYA customer
  • Have an avalization credit line at BOA KENYA AND/OR 100% same currency cash covered in case of avalized bills

Product Features:
Terms of payments applied in documentary collections:

  • Release documents against payment (D/P) or Cash Against Documents (CAD)
  • Release documents against acceptance (D/A)
  • Documents against promissory note or documents against undertaking

Current Standard Pricing:

  • Product Fee: As per bank’s standard tariff
Invoice Discounting


Product description:

The Invoice Discounting allows the company to draw money against its invoices issued before the customer is actually paid. To do this, the company borrows a percentage of the value of its invoice from a bank, effectively using the unpaid sales invoices as collateral for the borrowing.

Target customers:

  • All businesses

Eligibility:

  • Be a BOA KENYA Customer
  • Have an approved credit line at BOA KENYA
  • Presentation of the customers list
  • Invoices presented by the customer must be of high quality (from reputable corporate body).

Product features:

  • Acceptable invoices
  • Invoice presented to discount has to be drawn from companies having a business or legal entity established in KENYA
  • The invoice number must be included in Invoice.

Current standard pricing:

  • Product Fee : As per bank’s standard tariff unless negotiated otherwise with client
FX Pre-Export Financing Loan


Product description:

  1. Locally finance working capital requirements
  2. Linked to a particular export order
  3. In local and foreign currency
  4. For a short term period (not exceeding 6 months)
  5. Within a credit line already approved by Credit Committee

Target customers:

  • Export-oriented Corporate Customers

Eligibility:

  • Be a BOA KENYA customer
  • Have an approved credit line at BOA KENYA

 Product features:

  • Short term loan with full repayment (principal PLUS interest) at expiry date
  • Loan amount is within a credit line
  • Duration : can be between 1 to 6 months maximum or longer on exceptional basis

Current standard pricing:

  • Product Fee : As per bank’s standard tariff unless negotiated otherwise with client
FX Import Short Term Loan


Product description:

  1. Finance in foreign currencies Customer’s imports
  2. In local and foreign currencies
  3. For a short term period (not exceeding 6 months) – longer tenor to have exceptional approval
  4. Within a credit line already approved by Credit Committee

Target customers:

  • Import-oriented BOA KENYA Customers

Eligibility:

  • Be a BOA KENYA customer
  • Have an approved credit line at BOA KENYA

 Product features:

  • Short term loan with full repayment (principal PLUS interest) at expiry date
  • Loan amount is within a credit line
  • Duration : can be between 1 to 12 months maximum

Current standard pricing:

  • Product Fee : As per bank’s standard tariff unless negotiated otherwise with client
IPC (Interim Payment Certificate) Discounting


Product description:

The IPC Discounting allows the company to draw money against its Interim Payment Certificates (IPC) issued by the Paymaster (contract employer) before the customer is actually paid.

To do this, the company discounts a percentage of the value of its IPC from a bank, effectively using the IPC invoices as collateral for the borrowing.

Target customers:

  • Customers acting in the Construction sector with reliable paymasters (Bluechip companies or Government-related institutions)

Eligibility:

  • Be a BOA KENYA customer
  • IPC presented by the customer must be from a reliable and approved paymaster having a legal entity in KENYA
  • Have an approved IPC credit facility at BOA KENYA

Product features:

  • Can be an IPC line or a temporary facility for one contract

Current standard pricing:

  • Product Fee : As per bank’s standard tariff unless negotiated otherwise with client

For more information on solutions that suit your business please contact us on – tradefinancekenya@boakenya.com
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