Open account financing has the potential to boost the country's exports, but higher pricing compared with LCs may erode competitive edge of exporters, bankers say.
The views came at a webinar on Friday, organised jointly by ICC Bangladesh and the Asian Development Bank.
The bankers said the new regime may open up opportunities for raising the country's shipments, both in Asia and other parts of the world.
Bangladesh aims to achieve US$50 billion shipments over the next few years.
Top bankers said problems like importing entities failing to make payments may crop up. The cost to be measured at a maximum of LIBOR plus 3.5 per cent as per the Bangladesh Bank guideline is higher than that of letter of credits (LCs).
Such high pricing will erode competitiveness of Bangladesh-made products in the global market as LCs cost much low, they added.
On June 30, the central bank issued a circular allowing export under open account credit terms against payment undertaking.
The bankers stressed the need for conducting training and other awareness programmes to promote the instrument for exporters and other relevant people.
The topic of the International Chamber of Commerce, Bangladesh and the ADB-sponsored webinar was the global awareness about the open account export transaction and recent policy changes in Bangladesh.
Rokia Afzal Rahman, vice president of ICC, Bangladesh chaired the programme.
Muhammad A (Rumee) Ali, chairman of the ICC Bangladesh Banking Commission and CEO at the BIAC, spoke at the progrmme.
Humayun Kabir, executive director of the Bangladesh Bank, delivered a short presentation on the policy changes.
Vincent O'Brien, member of the executive board of the ICC Banking Commission, Paris and director of the ICC United Arab Emirates, was moderator of the webinar.
Managing director and CEO at the Islami Bank Bangladesh Limited Mahbub-ul-Alam, Chief Executive Officer at Standard Chartered Bank Bangladesh Naser Ezaz Bijoy, managing director & CEO at Mutual Trust Bank Syed Mahbubur Rahman, chief executive officer at HSBC Bangladesh Md Mahbub Ur Rahman and president & managing director at Bank Asia Limited Md Arfan Ali were discussants at the programme.
Speaking at the programme, Bangladesh Bank executive director Humayun Kabir said this is the first step towards reaching a new horizon of trade financing.
He said the learning process should be continued to promote it.
Standard Chartered Bank CEO said the block chain technology is very useful in handling this type of transaction, adding that his bank may develop a partnership with the local banks in this area.
MTB CEO Mahbubur Rahman felt that the new mechanism is needed and the Bangladesh Bank has rightly issued the circular.
He said awareness for both bankers and exports is of utmost necessity to make it popular in the financial market.
He said pricing should be lowered to make Bangladesh-made goods competitive in the world.
Bank Asia president Mr Ali said the Asian market, led by China, has been growing at a fast pace in recent years. And this new system will help grow Bangladesh's shipment to Asian markets and other parts of the world.
HSBC chief executive officer Mr Rahman said the circular issued by the Bangladesh Bank is well articulated. He said this will diversify trade credit.
He however said the risk associated with the mechanisms should be addressed for both large and SMEs.
Speaking at the programme, Mr Mahbub-ul-Alam said that open account financing to be made in favour of the exporters is not debt.
He, however, said the membership cost of FCI (factor chain International) is costly. Banks usually become members of the FCI for such kind of transactions, but it is not mandatory.
He noted that the counterparty risk is there and it should be addressed.
That said, he noted such financing will make the exportable goods competitive in the global market.
The new instrument is believed to be key mechanism to boost exports as many countries have already switched over to it replacing traditional LCs.
Secretary General of ICC Bangladesh Ataur Rahman delivered a vote of thanks.