Salim Ahmed :
To manage foreign trade risk obtaining credit report is mandatory for both exporter and importer. According to the guideline of central bank of Bangladesh on foreign exchange transactions (GFET, V-1), Chapter seven, Authorized Dealer (AD) have to collect credit report from their branch abroad or international credit report providing agencies before opening LC (Letter of Credit) or offering trade services to the importers. In similar fashion, banks are also required to obtain information on foreign buyers before singing export deal. The threshold for this is $ 10, 000 in case of contract or LC by proforma invoice and $ 20,000 for indents issued by local agents of foreign suppliers.
Although so many foreign companies are selling credit report through their local agents in Bangladesh but they are not effectively regulated or less regulated by our government or Bangladesh Bank. This will gives other avenues for raising the risk of trade. Centralbank guides all AD banks to maintain a central database for managing the credit reports of foreign buyer or seller. But the number of banks is doing so are very negligible. Now a days credit report agencies are also bindings us to buy the same item for multiple times. Let’s explain, how it works. Including Dun & Bradstreet, few credit report agencies writes “Exclusively for X bank limited” by water mark inside the credit report. Hence other banks are unwilling to use the same credit report though the report falls within the validity period (12 months) determined by Bangladesh Bank. By this way we are paying several times in a year for a single credit report. For example, in a single year if Bangladeshi importers are importing from a same supplier of Shanghai of China and opens 200 LCs with 60 banks of the country than we have to collect 60 or more credit report of the same supplier and must have to pay at least 60 times or more. Think average credit report charge is $150 than country has to pay $ 9,000 or more per year. That means we are getting one service (credit report) but gives payment at least59 timesmore which deplete our valuable foreign currency reserve due to our inefficiency. This has increased our cost of doing business, decreasing the profit margin and leads to be less competitive in business.
To ensure proper utilization of every penny of our foreign reserve, we should take proper measures collectively. AD banks may refuse to accept “Exclusively for X bank limited” inside water marked indicated credit report from the credit report agencies. If there is a scope Central Bank should come forward with proper direction regarding this issue so that AD banks get legal base to protest this malpractice by the foreign credit report companies. This will help a bank to use the same credit report obtain by another bank on the same buyer or seller without making multiple payments within a year which inversely will minimize the misuse of our valuable foreign currency reserve. Besides, central bank has to make adequate arrangement to regulate international credit report agencies business in our country by means of licensing or any other means which can also be a source of income for the government. Moreover Bangladesh Bank can gives standards on credit report structure, like minimum 10 types of information must be included in a credit report under specific title. It will help to minimize the quality deviation among the credit report agencies and increase the efficiency of the report to get clear and harmonize picture regardless of vendor.
To attain $ 50 billion RMG export by 2021, $ 4 billion shipbuilding industries export by 2025 and to ensure quality foreign trade by protecting our country interest from any unwanted fraud and trade based money laundering, a collaborative arrangement is must for all of us. We should take every possible step to ensure proper utilization of our hardship foreign currency. Tackling the mismanagement of credit report can be a pathway to achieve our trade goal.
Bangladesh Bank as well as respective authorities of the government along with AD banks should come forward jointly to regulate the credit report agencies in our country so that they are not allowed to mark “Exclusively for X bank limited” by watershed inside the credit report, which enables us to protect from multiple payment for the same entities report and enableinter or intra branches use by AD banks in Bangladesh.
(Mr. Ahmed is a banker and analyst. Email: [email protected])
