SMEs demand facility of back to back LCs and three way merchanting - Press Release issued by Union of Small and Medium Enterprises.

Karachi -- November 19, 2018 (PPI-OT)

Following is the text of press release issued by Union of Small and Medium Enterprises (UNISAME)

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The Union of Small and Medium Enterprises lamented that the commercial banks welcome the big importers and exporters but do not encourage the SMEs to indulge in back to back orders and L/Cs especially after the 2008 global credit crunch and down slide in commodities. The SMEs need the facility of finance against back to back business and also need the facility to act as intermediaries in three way merchanting.

President UNISAME Zulfikar Thaver said that the SME exporters when they get letter of credits (LC) or firm orders from their foreign buyers they need to be facilitated to open back to back LC or place order with the local manufacturer on the same terms and conditions as per the order or parent L/C of the foreign buyer in their favour and the SME exporters facilitated to pay the local manufactures after receipt of payment from the buyer or on discounting the L/C opened in their favour. The amount paid to the local manufacturer will be lower than the amount in the parent L/C because the SME exporter will deduct his profit and will also recover L/C charges and expenses.

Thaver said likewise a back to back L/C can be opened by a local buyer in favour of an SME importer who imports goods from a foreign buyer and sells the goods to the local buyer against a back to back L/C. The terms and conditions are the same except that the importer keeps his profit and adds on the bank charges and expenses.

UNISAME experts said the third type is for three way trade whereby the importer places order or opens L/C in favour of one country and sells the goods...