Export Trade Finance
One of the main objectives of the Program is to stimulate demand for domestic products from foreign buyers through the provision of trade financing on favourable terms. Financing is provided indirectly through the second-tier banks of Kazakhstan in the framework of the letter of credit payment method.
- Exporter and importer conclude an export contract
- Importer submits an application to a bank for issuance of a letter of credit in the favor of the exporter’s bank
- Importer’s bank issues a letter of credit
- Exporter’s bank and «KazakhExport» conclude an insurance agreement and agreement for placing a conditional bank deposit
- Exporter’s bank confirms the letter of credit
- The exporter delivers goods and provides documents to its bank
- «KazakhExport» places a conditional deposit in the exporter’s bank, which transfers the money to the exporter
- The importer repays the loan to its bank which in turn repays the inter-bank loan to the exporter’s bank
The company, reserving insurance functions, has developed and launched since the end of 2010 a new program to provide financial support to buyers of Kazakhstani non-resource products.
One of the main goals of the Program is to stimulate demand for Kazakhstani products from foreign buyers by providing them with trade finance on favorable terms. Financing is provided indirectly through second-tier banks of Kazakhstan within the framework of a letter of credit form of payment.
For Kazakhstan banks, this Financing Program (under insurance coverage and at the expense of KazakhExport funds) provides an opportunity to:
- Insurance up to 100% of risks of non-fulfillment of obligations by Issuing Banks;
- Expansion of the product line;
- Expansion of the client base.
- The Exporter concludes a contract with the Importer for the supply of goods/services.
- The Importer applies to the Importer's Bank (Issuing Bank) with an application for issuing a letter of credit.
- The Importer's bank (Issuing Bank) issues a letter of credit with a request to add confirmation.
- Conclusion of the Insurance Contract between the Exporter's Bank (Confirming Bank) and KazakhExport.
- The Exporter's bank (Confirming bank) advises the documentary credit with the addition of its confirmation.
- Delivery of goods/services.
- The Exporter submits to the Exporter's Bank (Confirming Bank) the documents corresponding to the terms and conditions of the letter of credit for payment.
- The Exporter's bank (Confirming bank) and KazakhExport enter into a deposit agreement (placement of a deposit for payment under a letter of credit).
- The Exporter's Bank (Confirming Bank) makes a payment in favor of the Exporter (from the funds placed by KazakhExport) while providing financing to the importer through the Issuing Bank for the requested period. The Exporter's Bank (Confirming Bank) sends the documents to the Importer's Bank (Issuing Bank).
- The Importer's bank (Issuing Bank) repays the amount of financing (principal debt and interest) on a specified date.
- The Exporter's bank (Confirming bank) returns the KazakhExport deposit amount.
- Repayment of the amount of financing (principal and interest).
- Actions of the state body of the country of the Bank-issuer of the letter of credit for expropriation, confiscation of the goods/services supplied under the contract, or interference in the activities of the Bank, which is of a discriminatory nature, preventing the execution of the letter of credit;
- War, civil unrest, riots of a mass nature in the country of the Bank-Issuer, preventing the Bank-Issuer from fulfilling its obligations under the letter of credit;
- Actions by a government authority in the country of the Issuing Bank that restrict or prohibit conversion into a freely convertible currency and/or transfer of payment under a letter of credit.
- bankruptcy of the Issuing Bank;
- non-execution of payment by the Bank-Issuer within the terms determined by the terms of the letter of credit.
- The amount of the insurance rate is determined based on the assessment of the country risk and the results of the analysis for the Importer's Bank (Issuing Bank).
- For political risks - up to 100% of the amount of the letter of credit.
- For commercial risks - up to 100% of the amount of the letter of credit.
- Financing is provided under contracts for the supply of non-commodity goods/services of Kazakhstan origin.
- Financing rate: СIRR + 2% per annum
- CIRR (Commercial Interest Reference Rate) is the minimum official rate for export credits that can be set by export credit agencies in countries that are members of the Organization for Economic Cooperation and Development: it is reviewed on the 15th day of each month and is based on the interest rate, established by government bonds (placed on the domestic market of a given country and denominated in the national currency of this country). Rate information is open and published on the OECD website.
- Financing period - up to 5 years
- The maximum amount of one deposit (placed for each received package of shipping documents) - 150 million tenge or equivalent in foreign currency. Within the framework of a letter of credit, several packages of documents can be provided for payment and there is no limit on the maximum amount of placement within one letter of credit, the limit is set only on the amount of each package of documents.