Stats show that many Kenyans don’t understand what trade finance is or what it entails. Rafiki Microfinance Bank is one of the top trade financiers in Kenya that is set to change the landscape and the perception about the same.
Trade Finance, according to experts from Rafiki Microfinance Bank, is the provision of any form of financing that enables a trading activity to take place and which may be made directly to the supplier, to facilitate procurement of items for immediate sale and or for storage for future activities, or it could be provided to the buyer to enable him to meet the contractual obligations.
There are terms associated with trade finance that every business person should be aware off in order to always be in the know.
Here are 10 of them:
Guarantee/ Bond
Means a formal promise or assurance (typically in writing) that certain conditions will be fulfilled in case a person does not perform as per their obligation.
Contract
Means a written agreement between two or more parties which specifies a legal obligation of each party for a job to be undertaken.
Tender
A structured invitation to vendors for the supply of good or services.
Procure
Is to obtain goods or services with care and effort from an external source.
Procuring entity/tendering entity
This is a body that procures or tenders for goods or services.
Bidder
This an entity of person sending a proposal to a procuring entity to undertake or manage a project/tender
Letter of Credit
A written undertaking by a bank gave to a seller (beneficiary) at the request and in accordance with a buyer’s (applicant) instructions to effect payment of a stated amount, against stipulated documents and within a prescribed time limit
Conventional security
Assets pledged by a customer for a loan/guarantee. It acts as a fallback for the bank in case the customer defaults. This security can be vehicles, land, listed shares, treasury bonds, life assurance policies or cash. However, household assets are not considered conventional.
Cash margin
A non-interest earning deposit held as security by the bank for a loan/guarantee issued to a customer.
Liquidation of a guarantee
Demand for payment by a procuring entity from an institution that issued a guarantee.
Rafiki Microfinance Bank has various trade finance products that they offer to their customers. Join them online on #RafikiTradeFinance hashtag and learn more.