ABSTRACT
Existing traditional finance such as open account sales or documentary letters of credit is associated with high costs and burdensome procedures involving multiple parties in a trade transaction. The use of letters of credit has declined over the years from about 50 percent in the 1970s to a mere 15 percent today. The rapid growth and expansion in global trade cannot be sustained without efficient and timely payment arrangements. Nonpayment or delays in payment for imports could tie up limited credit facilities and create liquidity problems for many exporting companies. Advance payments by overseas customers would similarly tie up a buyer’s limited resources and do not necessarily guarantee delivery of the agreed merchandise. Export companies need access to credit reports on a global basis. A number of issues should be considered before goods are sold on consignment between independent exporters and importers.
