The Trade Finance and Structured Trade Finance presentation made at the NIC Entrepreneur Workshop on 28th May 2014

1. Trade Finance and
Structured Trade Finance

2. Trade Finance Products
• Receivables Finance & Bill/ Invoice Discounting facilities
• Documentary Letters of Credit & Documentary
Collections
• Guarantees & Bills Avalized.
• Pre- shipment/Pre Export
• Import & Post Import Finance
• Stock, Commodity & Warehouse Finance

3. Why Use Structured
Trade Finance?

4. Traditional lending VS Structured Finance
Factors to
consider
Traditional Lending Structured Finance
Credit Risk
• Heavy reliance on the
creditworthiness of the
borrower
• Heavy reliance on the
performance of the transaction.
Financial
strength
• Requires a strong balance
sheet
• Requires that the transaction be
sound with readily available
receivables to self liquidate the
transaction.
Collateral
• Borrowers must provide
tangible assets to securitize
the borrowing
• Chargeable assets are limited
and are usually related to the
transaction.
Risk
Variables
• All direct and indirect (in
varying degrees, depending on
the financier, country and
borrower concerned) factors
relating to the borrower are
taken into account.
• All direct and indirect factors
relating only to the transaction
in question and not the
borrower.

5. Traditional lending vs. Structured Finance (Contd.)
Factors to
consider
Traditional Lending Structured Finance
Country Risk
• Country risks are deal
breakers in this form of
finance.
• Country risks are surmountable
provided the performance and risk
of the transaction is acceptable.
Expertise
Required
• Expertise required in
traditional finance is
relatively straight forward.
• Specialized and broad expertise
required in structured finance due
the complexity of transactions.
Costs
• Costs of traditional finance
relatively high.
• Up- front cost may be high,
however due to the lower cost of
funding overall costs of the
transactions are likely to be lower

6. Advantages Of
Trade Finance

7. •Helps manage your costs (commission not monthly interest)
•Gives control to the Supplier (“Exporter”)
• Assuring the exporter of payment
• Provides legal acknowledgement of existing debt
• Can provide alternative means and easy access to finance
• Facilitates good working capital management and as a
consequence building a sizeable, strong balance sheet.
• Facilitates increased turnover via access to funds for goods for
sale.
• Allows extension of credit terms hence increasing the supplier’s
portfolio.
Advantages of Trade Finance to the Exporter

8. • Gives control to the Importer (“Buyer”)
• Quality assurance - The importer can link contractual
requirements to the payment process through requesting specific
documents e.g. Inspection certificate (SGS Cotecna, Intertek )
indicating goods meet the specific industry and customer
standard.
• Budgetary control & Cash flow management – especially on Capex
items plant & machinery, guaranteed payment allows for
assembly and completion of machinery without funds being tied
up in form of deposits.
• Can help obtain longer credit terms from suppliers around the
guarantee of the payment obligation by the importer's bank.
• Facilitates trade where the buyer (“importer”) and seller
(“exporter”) have no previous relations.
Advantages of Trade Finance to the Importer

9. Case Study

10. Case Study: Purchase of Equipment and conversion into
a Lease
What we did
for the
Customer
Customer
Issue
• NIC trade finance issued an import letter of credit that
was confirmed by the supplier’s bank and that was
available for a period of 360 days from the bill of lading
date. (deferred payment)
• At maturity of the letter of credit the same was converted
into a lease payable over a period of 48 months.
• ABC company has won a contract to provide logistical
services to a mining company for coal and has signed the
contract over a period of 5 years.
• ABC company has two trucks and three tippers but
requires additional equipment to provide adequate
capacity.
• ABC company wants to ensure that the equipment
supplied meets the specifications of the employer and will
be able to provide service over the period of the contract.
• ABC company additionally requires a moratorium ( grace
period ) before the lease* payments kick in.
* lease in this case as it is specialized equipment for this industry and the lease structure has tax benefits attached to it)
payments kick in.

11. Customer
Benefits
• Timely Receipt of exact pieces of equipment ordered
• ABC can negotiate credit terms with the supplier if LC is confirmed
as the supplier can discount the letter of credit on presentation of
documents that conform strictly to the letter of credit
• Supplier risk is substituted by that of NIC bank overcoming credit
and country risk.
• ABC gets a moratorium ( grace period) before the interest and
principal (in this case lease payments fall due. ) only paying a
commission for the letter of credit.
• The trucks will already have started generating income from the time
of delivery to the commencement of the lease payment thus relieving
pressure on much needed cash flow to mobilize the site for the
contract.
• In the unlikely event that the supplier goes bust or is unable to
deliver ABC only loses commissions as opposed to a direct payment
which would have tied up cash flows without possibility of getting
subject funds back.
• Letters of credit assist in managing country risk in the event that the
country has foreign exchange controls thus making it easier to make
payment into the country or receive foreign currency in the case of
the supplier.
• The lease and the payments from the contract are used as collateral
to secure subject transaction.
Case Study: Purchase of Equipment and conversion into
a Lease (Contd)

12. Trade Finance Contacts
Kevin Odero
Product Manager
0723292921/020-2888499
kevin.odero@nic-bank.com
Maria Mkenda
Manager
0733856887/ 020-2888469
maria.mkenda@nic-bank.com
Customer Contact Center :
email customercare @nic-bank.com;
Tel 020 2888217, 0711041111,
0732141111,SMS 20488
www.nic-bank.com

13. THANK YOU