This is a highly secure, alternative trade financing facility aimed at overcoming challenges in obtaining conventional payment guarantees from governments and central or commercial banks. It is tailored for trading entities in high-risk frontier and emerging markets across the production, processing, and distribution value chain.
The main security needed is a current asset, either a commodity stored in a warehouse, a receivable in a secured collection or escrow account, or a combination of both. A collateral management agreement (CMA) is formed with the trading entity and an appointed collateral manager to oversee the supply chain aspects of the collateralized commodity.
As banks will retain the title of goods until repayment, this asset-backed approach allows trading entities to strengthen their financial standing by applying for off-balance sheet financing. Shifting the focus from the entity’s balance sheet to its transactional capabilities provides a cost-effective solution for commodity producers and distributors to trade in challenging markets.
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