Axios Credit Bank Malaysia | Axios Banking and Finance

Monday, January 29, 2024

Unlocking Opportunities: Understanding Trade Finance Services

Trade finance services are pivotal for businesses engaging in international trade. Whether you're a seasoned importer/exporter or just stepping into the global market, understanding trade finance is crucial for success.

Introduction to Trade Finance Services:

Trade finance encompasses financial products and services designed to facilitate international trade transactions. It involves a variety of instruments and mechanisms to help businesses mitigate risks and ensure smooth transactions across borders.

Financing Options in Trade Finance:

1. Letters of Credit (LC): LCs are widely used in trade finance. They provide a guarantee to the seller that they will receive payment once the terms of the agreement are met.
2. Trade Credit Insurance: This insurance protects businesses against the risk of non-payment by buyers.
3. Supply Chain Finance: Also known as supplier finance or reverse factoring, this option optimizes cash flow by allowing businesses to extend payment terms to suppliers while ensuring they get paid earlier.

Risk Mitigation Strategies:

1. Documentary Collection: In this method, the exporter ships goods and then forwards the shipping documents to the importer's bank, which releases them to the importer only upon payment.

2. Bank Guarantees: These are issued by banks to guarantee performance and fulfill financial obligations. They offer security to both buyers and sellers in international transactions.
3. Foreign Exchange Risk Management: Fluctuations in currency exchange rates can significantly impact international trade transactions. Utilizing hedging tools like forward contracts can help mitigate this risk.

Global Trade Strategies:

1. Market Research: Understanding target markets and their regulatory frameworks is essential for successful international trade.
2. Customs Compliance: Complying with customs regulations and documentation requirements is crucial to avoid delays and penalties.
3. Strategic Partnerships: Collaborating with local partners or distributors can help navigate cultural differences and market peculiarities.

FAQs (Frequently Asked Questions):

Q: What is the difference between trade finance and export finance?

A: Trade finance covers a broader spectrum of financial products and services related to international trade, while export finance specifically focuses on financing the export of goods and services.

Q: How can small businesses benefit from trade finance services?

A: Trade finance services offer small businesses access to financing options and risk mitigation tools that enable them to compete in the global market.

Q: Is trade finance only for large corporations?

A: No, trade finance services are available to businesses of all sizes, from startups to multinational corporations.

Conclusion:

Trade finance services play a pivotal role in facilitating smooth and secure international transactions. By leveraging financing options, risk mitigation strategies, and global trade tactics, businesses can unlock new opportunities and expand their reach in the global marketplace.

Wednesday, January 24, 2024

Examining the Benefits and Characteristics of Offshore Banking

Offshore banking has generated both conspiracy and debate for many years. It alludes to the custom of maintaining bank accounts in a nation other than one's own. Although there are some people who link offshore banking to illegal activity and tax cheating, it's important to realize that it is a real financial strategy with several benefits. This post will examine why companies and people choose offshore banking, the characteristics of offshore accounts, and the possible advantages and disadvantages.

I. Justifications for Foreign Banking:

1. Efficient Taxation:

Offshore jurisdictions frequently offer advantageous tax laws, enabling people and companies to reduce their tax obligations lawfully. Tax incentives, exemptions, and reduced tax rates compared to high-tax nations are used to accomplish this.

2. Privacy and Confidentiality:

People who respect their financial privacy and want to be shielded from future legal conflicts or media attention may find this appealing.

3. Real Estate Arrangement:

Estate planning flexibility, allowing people to arrange their inheritance and assets more effectively are provided by the Offshore accounts. This can guarantee a more seamless transfer of wealth to beneficiaries and reduce probate problems.

4. Currency Diversification:

By enabling account users to hold a variety of currencies, offshore accounts provide a hedge against exchange rate swings. Those with cross-border financial interests and multinational corporations benefit most from this.

II. Crucial Aspects of Foreign Banking:

Currency Accounts:

The capacity to maintain accounts in many currencies is one of the core characteristics of offshore banking. As a result, account holders can control foreign transactions, reduce currency risk, and benefit from advantageous exchange rates.

2. Accessibility and Online Banking:

Holders of the account can easily manage their funds from any location all over the world with the help of offshore banks, which offer frequently accessible online banking services. For those multinational businesses with global financial interests, this accessibility is essential.

3. Offshore Wealth Management:

Offshore Banking Services includes wealth management that can be provided by Offshore banks, such as portfolio management, estate planning, and investment consulting. These services serve high-net-worth individuals seeking all-inclusive financial solutions.

4.Business Services:

Establishing trusts, foundations, and international business corporations (IBCs) are among the corporate services that offshore countries are well-known for offering. These legal organisations provide tax advantages, asset protection, and increased privacy for companies that operate internationally.

5. Minimum or Zero Taxation:

Many offshore jurisdictions provide minimal or no taxes on inheritance, capital gains, or income. Businesses and individuals looking to maximise their tax positions within the bounds of the law are drawn to this tax-friendly atmosphere.

III. Advantages of Foreign Banking:

1. Reduction in Taxes:

The possibility of significant tax savings is the main advantage of offshore banking. Individuals and companies can lawfully lower their tax burden by utilising advantageous tax regimes, which will raise their income and net return on investment.

2. Asset Protection:

An additional layer of security against any political or economic unrest in one's native nation is offered by offshore accounts. By protecting wealth from regional hazards, this asset diversification across jurisdictions adds to the overall stability of the financial system.

3. Confidentiality in Offshore Banking:

A degree of financial discretion not necessarily accessible in domestic banking systems is provided by offshore countries, which prioritise secrecy and confidentiality. This might be extremely important for those who respect their financial privacy and wish to keep their affairs under wraps.

IV. The Dangers and Difficulties of Foreign Banking:

1. Adherence to Regulations:

Numerous international restrictions apply to all offshore banking, and noncompliance may result in legal ramifications. Avoiding legal problems requires being up to date on regulations and making sure that compliance is maintained.

2. Observation and Examining:

Offshore banking has frequently been linked to criminal activity and tax avoidance. Because of this, people or companies who use offshore accounts can come under more scrutiny from regulatory bodies, which could endanger their reputation.

3. Perils of Exchange Rates:

Although it can be beneficial to keep different currencies according to different countries, doing so exposes account holders to exchange rate risks. The total value of assets held in offshore accounts may be affected by Currency exchange rate fluctuations

In summary:

When handled carefully and thoroughly aware of the Offshore Banking Benefits, features, and dangers involved, offshore banking can be a very effective financial strategy for individuals and companies to secure Offshore Accounts. For those people who are looking to maximize their financial positions while staying within the bounds of the law, the desirable alternative is offshore banking due to its potential benefits, which include asset protection, tax saving secrecy, and ease of running business internationally.

Wednesday, April 26, 2023

How Technology Can Help Global Trade Become More Efficient, Inclusive and Equitable

Supply chain management has become more difficult as supply chains have grown increasingly interconnected. Furthermore, regionalization and the need for optimization have been sparked by external variables such as market instability, pandemic-induced changes, and heightened awareness of the environmental impact of supply chains. To make International Trade finance more effective, inclusive, and equitable, this has interestingly prompted the development of Trade Finance Service to aid small and medium-sized enterprises and other stakeholders in concentrating on supply chain resilience.

These cutting-edge innovations facilitate buy-and-sell discovery platforms and the internal communication and interoperability of service providers such as trade financiers, insurance providers, and logistics firms. For small and medium-sized businesses (SMBs), technology can simplify, broaden, and make fairer international trade.

Funding for Global Commerce

When financial institutions like banks issue financial instruments like Bank Guarantee and letters of credit to importers and exporters, this is known as International Trade finance. International trade finance includes importers, exporters, banks, and specialized finance companies.

Intelligent Supply Networks

Many small businesses are adopting artificial intelligence (AI) based solutions, allowing for the more advanced supply chain management. Models for predicting future demand, end-to-end transparency, dynamic planning optimization for inventory control, and automated process optimization for waste reduction are all part of the picture. To construct prediction models and conduct correlation analysis, each of these factors is essential for identifying the drivers and moderators of supply chain performance.

Originally published at https://www.axioscreditbank.com

Key Differences Between A Letter Of Credit & Standby LC

Letter of credit (LC) & Standby Letter of credit (SBLC) are both the most popular, & reliable trade finance instruments used by global importers & exporters in international trade to reduce the risk of payment failure & to ensure financial stability.

A Letter of credit is a primary method of payment, while Standby LC is used when there’s a risk of buyer’s non-performance during a transaction. So, what is the difference between an LC and SBLC?Let’s check out:

Letter of Credit Vs Standby Letter of Credit

Both the letter of credit (LC), and the Standby letter of credit (SBLC) are payment guarantee instruments used in international trade. In this article, we’ve discussed the key differences and usage between LC and SBLC. Take a look:

What is a Letter of Credit?

Under a letter of credit service, the issuing bank guarantees an on-time & full-fledged payment to an exporter on behalf of its client ie. importer for the ordered goods or services. But in the event, if the importer defaults in payment or is unable to fulfill the terms & conditions of the LC contract, then, the issuing bank will compensate the beneficiary ie. the exporter.

The role of the issuing bank is to make sure that the buyer pays on time and the agreement goes as planned catering to all the T&Cs being followed by both parties.

Originally published at https://www.axioscreditbank.com

Tuesday, December 27, 2022

AMR Global Supply Chain Finance Market to Reach $13.4 Billion by 2031

As per the latest news, a rise has been seen in the acknowledgement of supply chain finance in emerging economies to support the development of the global supply chain finance market. The Covid-19 pandemic significantly improved the interest in new technologies, including electronic/digital invoices, artificial intelligence, smartphone and mobile internet access, and blockchain technology in trade finance transactions, tremendously affecting the development of the international market. Area-wise, the Asia-Pacific region held a noticeable share in 2021.

According to the report released by Allied Market Research, the global supply chain finance market produced $6 billion in 2021 and is expected to reach $13.4 billion by 2031, developing at a CAGR of 8.8% from 2022 to 2031. This report comprehensively evaluates the top winning methodologies, emerging trends in the market, market size and estimations, value chain, vital venture pockets, drivers & valuable opportunities, competitive scenario, and territorial conditions. This report is a relevant source of data for new participants, shareholders, leaders, and shareholders in introducing crucial methods for the future and measuring vital steps to boost and improve their position in the market efficiently.

Covid-19 Situation:

1. No doubt that the sudden outbreak of the Covid-19 pandemic hurt the development of the international supply chain finance market due to the growth in remote working activities forming the overwhelming task of catching information from many locations and sources for the supply chain finance companies.

2. On the other hand, the global pandemic outbreak also increased the demand for new innovations, including digital invoices, AI, blockchain in trade transactions etc., which resulted in the development of the global market.

Things To Keep In Mind While Choosing a Letter Of Credit

What Is A Letter Of Credit?

A letter of credit is a legal, written document that guarantees the buyer’s timely & full-fledged payment to the sellers. The buyer’s bank issues it to compensate the seller if the buyer defaults or cannot pay the seller. In such cases, the bank covers the full or remaining amount on behalf of the buyer.

In other words, an international letter of credit service is a legally-binding finance instrument issued by a bank or trade finance institution to ensure on-time payments for the goods received on behalf of the buyer. It is also known as a Documentary Credit, where if any buyer fails to perform their due obligation, the bank pays the seller on behalf of the buyer, who then repays the bank later.

Issuance of a letter of credit helps reduce the payment failure risk for the seller as it shifts from the buyer to the bank. On the other hand, it also allows the buyer to make an early payment to the seller, improving his credibility in the market.

Monday, July 18, 2022

All About Free Trade Agreements

What Is A Free Trade Agreement?

A free trade agreement or FTA is an arrangement between two or more countries to reduce trade barriers to encourage easier imports & exports. Under an FTA, a group of countries signs a trade agreement according to which goods & services can be imported and exported with little or no government tariffs, import quotas, or subsidies, etc. Here, two or more countries agree on certain obligations that affect the trading of goods & services across the borders and determine tariffs & duties on imports & exports. The main agenda of an FTA is to facilitate uninterrupted trade and commercial ties between participating nations. To put it simply, free trade agreements are treaties to regulate tariffs, taxes, and duties that are imposed by countries on their imports & exports.

Types Of Trade Agreements

There are usually three types of trade agreements which are:

1. Unilateral

2. Bilateral

3. Multilateral

1. Unilateral Trade Agreement - A unilateral agreement is a type of agreement that is imposed by a nation without regard to others. In simple words, it takes place when a country imposes trade restrictions without entertaining the responses of other countries. It only benefits the imposing country and is not negotiable.

2. Bilateral Trade Agreements - As the name implies, it is an agreement that involves two countries where they both agree on loosening trade barriers to encourage & expand their trading opportunities globally. They lower tariffs, import quotas, export restraints, and other trade barriers that further promote trade & investments.

3. Multilateral Trade Agreements - It can be understood by its name as it involves three or more countries. But since the number of participating countries has increased, it makes the negotiations difficult. They are more complex than bilateral agreements as each country differs in needs, & opinions.

Originally Posted: https://www.axioscreditbank.com/blogs/all-about-free-trade-agreements

Friday, July 8, 2022

Commodity Finance And Its Benefits

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

Monday, May 24, 2021

Is Private Banking A Right Decision? Find Pros & Cons

Today, private banking is a popular concept and already has made its influential place among investors to assist them in managing their investments, tax procedures, and many more areas along with the regular banking & financial services. If you are also a businessman and looking for availing of private banking services, this blog can help you to avoid the possible risks by making you aware of its certain pros & cons. But before we start, let’s understand what private banking is.

What Is Private Banking?

The concept of private banking revolves around a set of more personalized banking & financial services/products that are being provided to individuals with high net worth by banks or FIs. You can understand it by the term “Private” that stands for more personal services than regular banking. It includes investments, tax planning, portfolio management, and estate planning & many more.

Pros of Private Banking

The clients enjoy several benefits when they use private banking. As more & more banks are getting digitized, it is quite easy to get in touch with an expert to consult on various banking matters. Some of the pros of private banking are here as follows:

Privacy - The biggest benefit of getting private banking services is a high level of privacy. Be it private banking’s clients, their financial evaluations, or personalized services offered to them, all related banking data is kept private, confidential & anonymous. It is essential as it helps private bankers avoid exposing/revealing the offered services from their competitors.
Investment Options - Clients that apply for private banking get a plethora of investment opportunities through private bankers. Apart from this, they are also provided with suitable & appropriate resources & products to manage their financial activities better.
Personal Interaction Than Others - As we have mentioned earlier, customers with private banking services get personal attentiveness from the bankers who work closely to determine investment goals. Not only it eliminates the frustration of being on hold over a phone call to communicate with the available authorized person but also you get the assistance of bankers who are aware of your financial situation.
Perks & Discounts - Private banking clients also get many valuable & noticeable perks & discounts from banks such as discounted loan rates, or refunds on fees for ATM withdrawals or some foreign transactions, etc. Many private banks also arrange exclusive events for their private clients.
Positive Outcomes - The private bankers are experienced experts who are passionate about fulfilling your investment goals and make smart decisions for their clients focused on positive returns on investments.

Cons of Private Banking

Additionally, there are some disadvantages also of availing of private banking services. Here they are as follows:

Uncertainty - The concept of private banking tends to witness a high turnover rate. It means that often the particular private banker that has been assigned to handle your investment requirements may change and you are bound to repeat the same process and build a relationship with them to understand their personalized service.
Low-Interest Rates - It often happens under private banking where you need to put your money in various accounts & investments. That means, you have several saving accounts and many private banks pay low-interest rates on those savings. Instead of doing this, you could get much more interest by keeping your money with a bank that doesn’t offer private banking.
Dispute of Interests - You need to understand one more fact that the private bankers are paid by their banks or financial institutions that employ them rather than being directly paid by their clients. This could invite disputes of interests where they need to think about whether to favor your interest or their banks.
Management Fees - Private banking is generally associated with a higher management fee than regular banking. You may need to pay it either as a monthly service fee for bank accounts or a percentage of your investments which raises a pretty much attractive amount to them as you provided quite a large piece of investment to the institution. So before availing of private banking, be aware of its fee structure.
Limited Services - Although private banking provides you access to good investment deals, it could generally be restricted to the proprietary products of the banks. Additionally, the private banking services, be it an investment, tax, or anything else, will be professional ie. you will get perhaps less creative services.

Looking for private banking services? There are several banks & financial institutions out there providing innovative & exceptional private banking services to a plethora of individuals. Go through them carefully and choose the best after considering these pros & cons.