What is IMPORT LETTER OF CREDIT and EXPORT LETTER OF CREDIT?

Import letter of credit:

In presence days. Most of the foreign trade payment are made through L.C. the trade is very much finance by these letters. L.C have provided a good facility both the importer and exporter. The importer, have the confidence in bank promise to make the payment rather than on the importer for his imports. Moreover the importer will make the payment only when the goods are shipped and the relevant documents are received. On the issuance of an import L.C, the importer will fill the application form all the relevant information regarding the imports will be based on the contract of the sale and include important items of the contract like. Value of the imports, place of shipment, and unloading details. On the satisfaction of the bank for information supplied, it will signed and acceptance agreement bounds the importer to make the required payments as and when he will be director.    

Export letter of credit:

In foreign trade transactions, there is a risk of payments of goods exported because the exporter is unaware of the credit standing of the importer. Naturally, he will follow a way by which he is satisfied and be sure to have his payment. The commercial bank in foreign country undertakes the obligation to make payment to the exporter, which is minimizing the rise of the exporter. Hence a commercial L.C is issued by the importers bank to the exporter for this purpose.

Receiving the L.C from the issuing bank, the exporter will examine the following information

a.                 Advise number:

The L.C must have an invoice number for further references and identification given by the advising bank.

b.                 Value of the L.C:

The value of the merchandise. Shipped and the amount of the L.C to be paid by the bank.

c.                  Importer’s name:

The name of the importer as mentioned in the L.C must be checked by the exporter.

d.                 Time period of payment:

In sight a L.C, the payment will be made immediately by the issuing bank, but in case of time lender of credit, the payment will be made after some mentioned period of time.

e.                 Shipping document:

The exporter must carefully prepare the shipping documents in accordance with the terms of the L.C. in case of the any defect the issuing bank may refuse to honor the draft.

f.                   Expiry of L.C:

L.C must certain an expiry date. Hence it is very necessary that there should be a reasonable time with the exporter to arrange shipment.

Describe the method of making international payments?

The main methods which have been adopted for making international payments through the banking system are as follow:

1.                 Bill of exchange:

It is used for making international payments for the purchase of goods, services and capital transactions. The creditor can draw the bill of exchange on debtor or on his bank under the terms of L.C.

2.                 Bank draft:

The debtor can make the foreign payment by purchasing a bank draft from the bank. The draft is dispatched by the debtor to the creditor. He can claim the amount of draft from the correspondent bank.

3.                 Cheques:

The debtor can draw a cheque on his bank. The cheque is send to the creditor. The creditors deposit the cheques in his account. The creditor’s bank collects the amount of the cheques from the debtor bank. This method is used between the friendly countries.

4.                 Credit cards:

The debtor makes the payment to his bank, the bank issues a credit card. The debtor keeps the card with himself. When he visits to foreign countries, he can get foreign currently against this card. The debtor makes the payment personally to the creditor.

5.                 Letter of credit:

The importer opens an account with his bank in favors of exporter. The amount is paid in the bank. The bank issues a L.C. this L.C send to the exporter’s bank for making payment on amount of goods imported.

6.                 Traveler’s cheques:

Traveler’s cheque is an order drawn by a bank upon a self to pay a specified amount of money on demand to the purchaser of traveler cheque. The paying bank after comparing the signatures of the purchaser of a cheque, and makes the payment.

7.                 Telegraphic transfer:

The debtor makes the payment to the banker. The banker sends a telegraphic massage to his correspondent’s bank to make the payment. The bank can send the massage by cable to overseas countries. His method is the quickest method of payment.

What are the Modes of Islamic Financing?

Following are the different modes of Islamic financing which have been introduced in Pakistan.

1.     Musharika

Musharika is an agreement of business between two parties on the concept of profit and loss sharing, who contribute their funds, skills for its contribution.

In Musharika, bank provides funds to the businessman on the agreed profit sharing on the completion of the profit.

Features:

·         The agreement is governed by Musharika investment agreement with in the frame work prescribed by the state bank of Pakistan.

·         The management is controlled by the partners; bank only supervises the performance of the profit.

·         Sharing of profit or loss is calculated according to the funds initially invested or agreed ratio of profit.

·         The funds of the bank on the basis of Musharika are secured.

·         Bank shares only with those parties having good reputation and credit standing. The parties must have a good management and sound experience in the required field of investment.

2.     Mudariba:

Mudariba is a form of partnership of two parties in which one participates. Its capital and the other his knowledge or skill about business. Some persons have spare funds but lack of required skills for its investment. On the other hand some people may possess good skill regarding the business. In this system which based on the ISLAMIC principles, the profit and loss is shared with the agreed ratio at the end of the year.

The Mudariba Company will be registered under the company ordinance. It’s paid up capital shouldn’t less than the 7.5 million. The Mudariba Company may be of two types that are: Multipurpose and specific purpose.

Features:

  

• Banks and financial institutions are not allowed to established a Mudariba company.
• Mudariba Company may be in private sector or public sector.
• It should be registered with the registrar of Joint Stock Company.
• The promoters should be of good integrity and also possess required skill and knowledge.

3.    Participation term certificate:

Participation term certificates are transferable instrument issued by a company for meeting the long term requirement of capital under ISLAMIC banking. According to the company ordinance. It can issue these certificates for raising its funds.

Feature:

·           Participation term certificate are transferable.

·           The certificates are issued by the J.S. companies.

·           These are issued for meeting medium and long term finances.

·           Profit is shared in agreed ratio. 

·           The certificate holders have an option to participate in all meeting of    the company.

·           A portion of these certificates can be converted into shares under certain conditions.

·           Losses are shared in the ratio of their investments.

4.    Leasing:

“Leasing is an agreement, in which the owner (lessor) give an asset to the borrower for the specific period of time, for the purchase of rent”.

The ownership of an asset will remain with the owner (lessor), only the right of use is given to the borrower for specific period of time.

ISLAMIC IDEOLOGY COONEL approved the method of leasing for getting the medium and long term finance.

Features:

  

•     Unblocking the capital in purchase of new asset for business.
•      Ownership will remain with the owner.
•      Tax exemption to the owner.
•      Quick turn over of finance.

5.    Rent sharing:

Rent sharing system provides finance generally for the purchase and construction of houses. The finance also becomes the partner in the house. The loan is repaid along with the share of rent during a given period of time. In Pakistan house building finance corporation (HBFC) is performing function of rent sharing system.

Features:

·         The corporation or bank both contributes the funds for the construction of houses.

·         The funds are provided according to the legal agreement.

·      The funds are provided for a specific period at also for construction of a    particular house.

·    The amount advance is repayable in installments along with the share of rent according to the schedule.

·         Rent assessment is made on the quality of the construction and the locality of house.

·        The owners have an option to refund the total amount any time and can be settle the amount before the due period.

·         The rental value is revised after three years.

What is exchange control? and methods of exchange control.

Exchange control:

Is a system through which the rate of different foreign currencies is determined.

Methods of exchange control:

In order to achieve objective of the exchange control. Some methods are applied which are defined as:

            “UNILATERAL AND BILATERAL METHODS”

In unilateral; method the government apply exchange control without consultation with the other governments. But in bilateral method a government applies exchange control with the mutual understanding and consultation with the other governments. 

Unilateral methods:

1.                 Exchange pegging:

Exchange pegging refers to the policies of fixing the exchange value of the currently according to the some deserved rate. When exchange rate is fixed higher than the market rate, it is called pegging up and if the exchange rate known as pegging down.

2.                 Standstill agreement :

In this agreement the relationship between two countries in term of capital movement remain unchanged. The debtor country is allowed to replay loan in installment or the short term loans.

3.                 Compensation agreement:

According to this agreement goods of equal value are exported and imported from each other country. Hence, no balance is left and no foreign exchange is involved.

4.                 Payment agreement:

In this method Creditor country will export more and more to debtor country and the creditor will import less and less from the debtor country to settle the account.

5.                 Foreign exchange rationing:

Government has the right to direct all the exporters and other investors to surrender all foreign exchange with the central bank. Foreign exchange so collected can be retaining by fixing quota of the amount and the rate of foreign exchange.

6.                 Blocking of foreign exchange:

During emergency a country may block the foreigner to transfer their funds in their home accounts.

Bilateral methods:

1.                 Cleaning agreement:

When two countries agree to settle their accounts in their home currencies, through the central bank, this method is known as cleaning agreement.

2.                 Moratorium application:

A legal authorization to debtor to stop payment is known as moratorium application. It is used to solve temporary problems of payment. A country can stop to make payments for imports and interest on capital.

Autodesk AutoCAD Civil 3D in Pashto Language Lesson 01-1

In this tutorial will learn about ... 

•  How to importing Survey points in AutoCAD Civil 3D, 
•  Survey Points Description, 
•  Survey Points Styles, 
•  Creating center line of road from survey points, 
•  Navigating through menu bar, & Introduction to civil 3D.
•  Description of Tool Space

 
Auto CAD Civil 3D in Pashto Road Project... by civil3DinPashto

Autodesk AutoCAD Civil 3D in Pashto Language Lesson 07

In tutorial you will learn about...

• Profile View Properties
• Label Styles
• Labeling Profile View
• Profile Data Bank Styles
• Alignment view settings
• Super Elevations

Auto CAD Civil 3D in Pashto Road Project Lesson 07 by civil3DinPashto

How to remove the difficulties of barter system?

The use of money has converted a barter economy into a monitory economy or money economy. The money has overcome the difficulties of barter system in the following ways.

1.                 Use of money:

Money is used now as a:

                                              i.            Medium of exchange:

The goods and services are now purchased and sold with the help of money. The difficulty of double coincidence of wants has been removed with the help of money.

                                    ii.        Money now serves as a common measure of value. The problem of comparing the prices of goods and services in the market is now simplified.

                                          iii.        With the help of money, the exchange of present goods on credit has been made easier. The problem of deferred payments has been solved with the help of money.

                        iv.           Money as a liquid store of value has facilitated its processor to purchase any other asset at any time.

                                            v.           Through money, value can be easily and quickly transferred from one place to another.

2.                 Liquidity to wealth::

Money imports liquidity to various forms of wealth such as land, machinery and stock stores etc. these forms of wealth can be easily converted into money.

3.                 Establishment of financial institutions:

The introduction of money has made it possible to establish financial institutions like central bank, commercial banks etc, which deal in currency and near money assets. Examples bill of exchange, bond and shares.

4.                 Market mechanism:

In a monitory economy market mechanism operates; the demand and supply are brought into balance by the movement of prices. The decision of what? How? And are whom to produce are determined in accordance with the market conditions.

5.                 Process of development:

In a barter economy the process of economic development is slow. With the use of money, division of labour has taken place, technology has developed, trade has expended in a monitory economy, and there is thus an all around economic progress.

What are the qualities of good money?

Following are the characteristics/qualities of good money.

1.                 General acceptability:

The essential quality of a good money material is that, it would be acceptable to all without any hesitation in exchange of goods and services.

2.                 Stability in value:

The another attribute of the good money is that, the value of the money should be satiable because money is the standard through which we measure the value of other commodities. If the standard itself is influenced by the changes in the demand and supply than how it can serve as perfect money.

3.                 Transfer-ability:

Money should be easy to carry. So the cow could be not suitable for this purchase. The attribute of the good money is to transfer one place to another place without any difficulty. So we can say that the material is greater in value but less in volume. In short, metals, coins, currency notes and cheques fully meet this test.

4.                 store-ability:

The value of money can be easily store in any thing is called good money. For example, gold, silver or paper is ideal for storing. So they are called good money.

5.                 Divisibility:

The money material should be easily divided into small parts as descried without losing its value. From this point of view, gold, silver and paper money are good money.

6.                 Informality/homogeneity:

The material used as money must be uniform quality. Otherwise it will not generally acceptable.

Natural goals like grains are seldom of uniform quality currency notes are exactly homogeneous.

7.                 Cognizability:

Only that material will be considered as good money, which can be easily recognize by the common man. One purchase of making coins out of the metals and giving them a special design to each type of currency note is to make them promptly recognizable.

What is letter of credit (L.C)? Describe its advantages?

The import and export of goods throughout the world is usually arranged by means of L.C. the importer requests his bank to open a L.C in favors of the exporter. The bank issues a L.C to the exporter as a requested. This L.C is a promise or guarantee by the bank to honor the bill drawn by the exporter promised the conditions of the L.C are fulfilled.

Paged has define a L.C in the following words:

“A L.C is an undertaking by a bank to meet the draft drawn to it by the beneficiary of the credit in accordance with the conditions laid down there in”.

The importance and advantages of L.C.

Advantages to the importer:

a.                 Satisfying the exporter:

An import of goods from abroad will have to satisfy the exporter that he will be paid for. The L.C enables the importer to satisfy the exporter that he will receive the price of the goods dispatched to the importer.

b.                 No risk about sales contract:

The importer doesn’t take any risk about the sale contract. He many are sure that the terms of the sale contract as mentioned in the L.C will be fully fulfilled, because of the opening as will be as in term diary bank are responsible for this.

c.                  Facility of payment:

The importer has not to pay the price of goods purchased until he receives the document of the goods by means of which he can tape the delivery of the goods.

Advantages to the exporter:

a.                 Security for payment:

A confirmed L.C provides maximum security to the exporter for the payment of the sale price. In view of the guarantee of the opening as well as confirming bank, he can be sure of receiving the price of his goods.

b.                 Immediate payment:

The exporter presents the documents to the issuing bank after the shipment of goods. The exporter bill is immediately paid by the issuing bank.

c.                  Pre-shipment finance:

Sometimes the exporter can get pre-shipment finance for the packing. Movement and even the purchase of the merchandise.  

d.                 No concern after payment:

After receiving the payment draft from the issuing bank, the exporters have no further concern with the transaction.

Advantages to the banker:

a.                 Source of income:

The financing of imports and exports through issuing L.C is an important source of income of the banks. The issuing and confirming of L.C drawn under term for which bank charges reasonable amount.

b.                 Ownership of the goods:

Until the payment of the amount is due, the ownership of the goods remains with the bank.