Few years back, or I should say before the economic crack down which took place only a year of two back has affected almost every business community including the trade finance community as well. The recent talks in trade finance community are all about the recent trends of trade finance and also the trends which are predicted for the days as well.
A few days back, I visited a community, where I find people talking about the recent trends of the trade finance business. I was amazed when I hear different comments from the people who were involved in that discussion. They were raising several questions and asking for the answers from one another, I don’t remember all the questions but the ones which I do, I would be disclosing them in front of you and I will not only disclose them but it will also discuss my point of view regarding the questions raised by the people involved in the discussion.
The first question which was raised by an individual involved in that discussion was regarding the letter of credits. He ways saying that what would be the upcoming initiative taken by the financial institutions regarding letter of credits. He got different answers but the one I thought was the most appropriate was that, in this tough economic situations financial institutions such as banks are also finding hard to survive, they are not finding as many customers to whom they can lend money in shape of loans (personal, business and etc). However, letter of credits has nothing to do with this; they are involved or are used in international trading business. Few years back, when international trading was not that much limited as it is now, financial institutions were willing to offer letter of credits to facilitate international trade. Now, things have changed completely, financial institutions are found hesitant at the time of issuing letter of credits, this is because of the uncertainty of the international trading business and because of this uncertainty, financial institutions would refrain themselves from issuing letter of credits, this means that people has to find other ways in order to facilitate trade financing.
Next important question which was raised in the discussion was regarding the risk of trading from different countries. An individual asked in that discussion that, how to determine the risk free countries for trading? Well, the answers given to this question from the people involved in this discussion were pretty much unclear. However, according to me, the answer to this question would be to consider the developing countries to facilitate trading business. Non- developed countries should be avoided for the time being because this is the demand of the current economic situations. Developed countries are the big fishes, so you won’t find growth there but developing countries are the one which are surely risk free yet profitable countries to consider.
Above mentioned were a few questions raised in the general discussion regarding trade finance community. The community was surely affected from the economic crack down but now once again, it is finding its foot holds in the business arena.