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CBE  
 
   
Foreign Credit Services For Import and Export
 
   

IMPORT LETTER OF CREDIT FACILITY

DEFINITION

  • A letter of credit (L/C) is an instrument issued by a bank whereby payments in international trade are effected by banks through documents. It is issued by the Bank at the request of a buyer (importer) to pay a seller (exporter) upon presentation of import documents specified in the instrument.
  • A letter of credit facility is a type of credit that CBE avails to importers (applicants) to pay a certain percentage of the value of the L/C while opening an L/C by setting a limit to the total value of the L/C to be opened.
  • The facility is secured against valid import documents and has a tenor of six months and, in exceptional cases, one year.

PURPOSE

  • It alleviaes temporary working capital needs of customers while importing goods

ELIGIBILITY

To be eligible for the facility, customers have to fulfill the following:

  • The goods must be eligible for import.
  • Present a valid import trade license.
  • Non-importers applying for a one-time letter of credit have to present an import permit and other relevant documents.
  • Present a written application, foreign exchange permit and proforma invoice.
  • NBE's clearance.
  • Insurance certificate.
  • Pay the approved margin payment and other fees
  • Present recent financial statements.

LOAN REPAYMENT AND RENEWAL

  • Customers have to settle the loan and receive the documents after they have been given notice by the Bank about the arrival of documents.
  • The Bank collects additional 3% penalty interest rate from customers who do not settle their loan with in 30 days after being served with a notice
  • The facility has to be renewed every six months or every year.

CANCELLATION OF L/C FACILITY

Customers will be charged additional 3% penality interest rate if they fail to settle the loan with in 30 days.

The facility may be cancelled when:

  • A customer's financial position and operational result deteriorates.
  • The customer fails to settle the outstanding balance and
  • The account falls overdue frequently.

EXPORT CREDIT FACILITY

PRE-SHIPMENT EXPORT CREDIT
DEFINITION

  • Pre-shipment export credit is a loan granted to non-coffee exporters starting from the procurement of inputs until the date of shipment of goods against guarantee by the National Bank of Ethiopia (NBE).
  • The availability period is determined with the consideration of the validity dates of the sales contracts, but it must be shorter than the validity date of NBE's guarantee.

ELIGIBILITY

To be eligible for the facility, customers must have:

  • A sound export performance record.
  • A valid investment certificate and/or trade license.
  • A sales contact and genuine order from the foreign buyer or an irrevocable Letter of Credit.
  • A written application.
  • In addition to NBE's guarantee, new exporters should offer acceptable security to cover the loan.

LOAN REPAYMENT

The pre-shipment export credit will be settled from the export proceeds of the goods for which the loan is advanced.

REVOLVING EXPORT CREDIT FACILITY

DEFINITION

  • Revolving export credit facility is an advance extended to exporters with a limited margin until goods are loaded on board, upon presentation of all relevant export documents to the Bank, except a bill of lading.
  • The facility has a tenure of six months or one year.

PURPOSE

The facility is availed to finance the temporary working capital requirement of customers when the goods are in transit for shipment.

ELIGIBILITY

Applicants should have:

  • At least a one-year satisfactory export performance
  • A good borrowing relationship with the CBE or other banks
  • A written application and renewed export trade license
  • A sales contract
  • An irrevocable letter of credit
  • Way bills such as truck way, rail way
  • Insurance contract
  • Certificate of cleanliness from the appropriate organ
  • Other documents as specified in the letter of credit, except the bill of lading
  • Customs declaration and CBE's annex declaration
  • Sales invoicevoice
  • NBE's permit.

LOAN CONTRACT

Customers have to sign a loan contract for each and every advance to be made.

LOAN SETTLEMENT AND RENEWAL

  • A revolving export credit will be settled from the export proceeds when all relevant export documents are presented to the Bank.
  • The facility has to be renewed every six months or every year.

CANCELLATION OF REVOLVING EXPORT CREDIT FACILITY

The facility will be cancelled if:

  • The customer fails to utilize the facility for one year.
  • The customer fails to ship the goods against which the advance is made.
  • The customer defaults for an unjustified reason.

ADVANCE ON EXPORT BILLS

DEFINITION

  • Advance on export bills is a post-shipment export credit provided to exporters with a certain margin against presentation of all the necessary export documents.
  • This credit is advanced for a period of fifteen days, and interest is charged if the loan is not settled within this period.

PURPOSE

An advance on export bills is intended to bridge the financial gap between the shipment of the goods and the realization of the proceeds.

ELIGIBILITY

  • This export credit will be advanced to all exporters who could present the following complete export documents, including a bill of lading, as per the terms and conditions of the letter of credit.
  • Applicants should have:
    • At least a one-year satisfactory export performance.
    • A good borrowing relationship with the Bank or other banks.

Applicants have to present:

  • A written application and renewed export trade license.
  • A sales contract.
  • An irrevocable letter of credit.
  • Way bills such as truck way, rail way.
  • An insurance contract.
  • A certificate of cleanliness from the appropriate organ
  • Other documents as specified in the letter of credit, including the bill of lading
  • Customs declaration and CBE's annex declaration
  • sales invoice
  • NBE's permit..