Trade finance keeps commodities and goods moving between producers, traders and buyers. The articles collected here explain the documentary credit and the doctrine of strict compliance, pre-export and prepayment finance, security over goods afloat and in storage, the assignment of receivables, and the role of the banks in Geneva and Zug that specialise in financing trade. They also look at the cases in which trade finance failed, what lenders learned from the losses of 2020, and how electronic trade documents and tokenised receivables are beginning to change the business.
Between the purchase of a cargo and payment by the buyer lie weeks in which the trader must finance the goods. Trade finance bridges that gap with documentary credits, prepayments, borrowing-base facilities and security over the goods, and the banks in Geneva and Zug are among its leading providers worldwide.
For traders from Asia, the Middle East and Africa, access to trade finance often determines how large a deal they can take on. Banks lend against the value of the goods and the quality of the documents, which allows a young trading company with a modest balance sheet to handle cargoes far larger than its own capital would support. The price of that access is transparency about counterparties, shipments and the flow of funds.
A bank financing a cargo wants to know who the buyer and seller are, where the goods are stored and shipped, and how the proceeds will return to the account. It relies on bills of lading, warehouse receipts, inspection certificates and insurance documents, and it expects them to be consistent with each other and with the underlying sales and purchase contracts.
Documentary credits are usually governed by the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce, known as UCP 600. Traders who understand these rules before they negotiate a sales contract avoid discrepancies that delay payment, and they can structure security, insurance and hedging so that the bank's requirements and the commercial terms fit together.
The articles explain the documentary credit and the doctrine of strict compliance, how a cargo of crude oil is financed, what lenders learned from the frauds of 2020, and how the bill of exchange of the medieval Geneva fairs laid the foundations of the business.
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