What is commodity finance?
Commodity finance refers to the financing/funding of the commodities being traded between importers & exporters in an international trade transaction. In simple words, the concept of commodity trade finance revolves around funding everything involved in a commodity value chain.
Why is commodity finance required?
Firstly, commodities that often get traded in a global transaction generally have low margins. Secondly, they are transferred between the global parties who don’t know each other, varying in terms of regional rules & legal guidelines. Hence, trust isn’t generated between importers-exporters. Third, there are other associated risks in commodity trading such as changes in foreign law, shipment issues, inflation, delayed delivery, quality issues, or counterparty's inability to pay for the delivered goods, etc.
To remedy the situation and avoid all the risks associated with commodity trading, commodity trade finance comes into the picture. Here is how these trade finance services Malaysia helps both the buyers & sellers in a global trade transaction. But first know, what commodities are:
What do you mean by commodities?
Commodities can be defined as a group of goods that are traded, sold, or delivered between transactional parties.
Originally Posted: https://www.axioscreditbank.com/blogs/commodity-finance-and-its-benefits
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