Increasing number of buyers are showing aversion towards opening letters of credit (LCs) and are resorting to alternative methods to import garments from Bangladesh which could put exporters at risk of losing proceeds, claimed media reports.
As per the entrepreneurs in Bangladesh, subsequent to brands and retailers adopting cost-cutting measures on account of the COVID-19 pandemic, buyers were offering businesses open account method to skip the cost of opening LCs.
Buyers are adopting cost-cutting measures amidst the pandemic and we will have to adopt risk-cutting measures through ensuring receipts, reportedly maintained Bangladesh Institute of Bank Management professor Md. Ahsan Habib while adding that LC was the best method to secure export proceeds but quite expensive and buyers might be unwilling to offer LCs to avoid some responsibility towards the suppliers as in the case of an LC, it is binding for buyer to pay for goods shipped.
Meanwhile speaking to the media, the President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Dr. Rubana Huq reportedly stated only 44 per cent of buyers had offered LC.
“At present, contracts are very loose with the buyers,” reportedly maintained the BGMEA President, while adding buyers often wanted flexibility and during the outbreak, loose and insecure trading contracts had contributed to the exporters’ woes.
