IBBL establishes credit guarantee arrangement with USDA

Islami Bank Bangladesh Ltd (IBBL) recently established a credit guarantee arrangement with the United States Department of Agriculture (USDA) in the US.

The organisation provides credit guarantees to US approved banks and financial institutions under this export credit guarantee programme (GSM-102), a press release said.

The USDA's Foreign Agricultural Service (FAS) administers the programme on behalf of the Commodity Credit Corporation (CCC), which actually issues the credit guarantees.

The organisation has already approved $30 million for IBBL, for which the importers of the bank will get discount facilities for a maximum of 18 months from USDA-enlisted banks at a lower discounting rate.

The exporter's bank will extend its financing facilities with no requirement of adding confirmation to the irrevocable letter of credit for which IBBL will issue a dollar-denominated, irrevocable letter of credit in favour of the US exporter.

The US exporter may get payment from US negotiating banks after submitting export documents. For this, the exporter is required to provide a report of export to the CCC for each shipment that occurs under the payment guarantee.

IBBL will make payments to the discounting bank at maturity of the bill. Through this arrangement with the USDA, the IBBL will get more opportunities to increase relationships with US-based financial Institutions.