MALAZO, KAVEN A.

CBET 22 502E

Module 5 – Assignment – Global Finance

1. Explain why so many international transactions require international trade credit

facilitated by commercial banks.
It is possible that the exporter does not have confidence in the importer or that the exporter
is apprehensive that the government may impose exchange controls that will impede
payment to the exporter. Meanwhile, the importer may not have confidence in the
exporter's ability to ship the items ordered, and as a result, the importer may choose to defer
payment until the commodities are received. Commercial banks can assist by offering
guarantees to the exporter in the event that the importer fails to pay the exporter.

2. Do Agencies that facilitate International Trade prevent Free Trade?

No, because each country has its own set of rules and regulations that must be followed
to safeguard the export and import of commodities and products against redemption. It
is reasonable to assume that the agencies are being safeguarded solely to limit risk and
boost international trade.

3. Briefly describe the Working Capital Guarantee Program administered by the

Export-Import.
The Working Capital Guarantee Program incentivizes commercial banks to lend short-
term export financing to eligible exporters by guaranteeing 90 to 200 percent of the
loan's principal and interest. This guarantee safeguards the lender from WEB
Information concerning interest rates charged by an export credit institution, the United
States Export-Import Bank (EXIM).