As the name suggests Trade Finance literally means funding of trade transactions between a buyer and a seller. Basically, trade finance is a service provided by banks and other financial institutions to support domestic and international trade transactions between a buyer and a seller by financing the trade itself.
Let us understand trade finance with an example:- Suppose a seller wants to be paid before he/she starts shipping his goods than the buyer might ask the seller to provide documents for the goods being shipped now this is the point where trade finance comes into play. To keep both the parties on the safer side the bank can provide certain forms which can support the trade like a letter of credit or a bank guarantee as well. Now with this letter of credit, the buyer’s bank may actually provide the required payment before shipping to the seller’s bank after required documents being shown by the seller’s bank which is called a bill of landing.
Now, this example shows that how trade finance has made trade transactions very smooth and comfortable by designing such forms and policies. Various other forms which can support trade finance includes Documentary Collection forms, Trade Credit insurance, Finetrading forms etc.
Recently Asian Development bank also known as ADB has signed a 100 million dollar agreement with CITI to support its trade transactions with a trade finance program. It has also come into attention that both these firms are working on trade finance for past 10 years. And such a partnership of the firms has supported all kinds of enterprises may it be big or small financially, which has further resulted in growth and jobs creation in the country. Mr Steven Beck head of trade finance in ADB said that the bank is very much gratified for the agreement renewal with CITI to fill the trade finance gap and will keep up the with the good relations.
With this kind of trade finance support services from the bank CITI has reached to 200 million customer accounts and has expanded its business in almost 158 countries around the globe providing its financial services and products to consumers government institutions and others private corporation as well Various other services provided by CITE are security brokerage services, wealth management certain investment banking services, transaction financing service and numerous other financial services as well which made Asian development bank’s operations reached up to $32.2 billion in which $11.9 billion is in co-financing.