How invoice discounting will help exporters get faster payments
Invoice discounting is a digital system where exporters sell their receivables to financial institutions in exchange for early cash
Bangladeshi exporters often face long delays in receiving payments from foreign buyers, sometimes waiting three to four months.
To address this, Bangladesh Bank, the central bank of the country, is preparing to allow exporters to use global trade finance discounting platforms, which provide faster access to cash.
How it works
Invoice discounting is a digital system where exporters sell their receivables to financial institutions in exchange for early cash. Key steps include:
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- Exporters upload invoices accepted by buyers onto the platform.
- The system verifies the buyer's credit rating automatically or through the buyer's bank.
- Multiple financiers, including banks, non-bank financial institutions, or investors, bid to purchase the invoices.
- Exporters receive slightly less than the invoice value upfront. For example, a $1,00,000 invoice may yield $97,000 depending on the buyer's credit rating and the remaining time until payment.
- When the buyer pays in full on the due date, the financier recovers the advance.
This mechanism ensures exporters get funds quickly without taking additional bank loans while transferring the foreign buyer's credit risk to the financier. It also allows exporters to maintain production and accept new orders without waiting months for payments. The benefits are:
- The initiative is expected to benefit the export sector in several ways.
- Quick access to funds, reducing reliance on high-interest loans.
- Small and medium enterprises gain better access to financing.
- Exporters can maintain production and fulfil orders without delay.
- Integration with global platforms ensures more competition and transparency in trade finance.
- Maximum discount rates will be capped at SOFR plus four, or around eight per cent, keeping costs manageable.
Industry experts welcomed the move as Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, said many buyers demand 60 to 90-day deferred payments, forcing exporters to take high-interest loans.
Syed Nasim Manzur, managing director of Apex Footwear, noted that the platforms will improve competitiveness by allowing exporters to meet international payment terms without losing orders.
By joining global trade finance discounting platforms, Bangladeshi exporters can receive payments within days instead of months, access better financing, and focus on increasing production to meet global demand efficiently.
