Who invented trade finance

The course is divided into 4 Modules Covering all major aspects of Trade Finance. Assessment Enables the trainee to test their understanding of the course. Introduction to Trade Finance. This course contains 2 hours of structured online training providing an introduction to trade finance. The objective of this training course is to provide better understanding of trade finance products, principles and risk management. Module 1: Financing International trade This section looks at the key considerations you need to think about when getting involved in International Trade and how the Trade Finance Services of banks can help you.

The ongoing digitisation of trade finance

Trade involves the transfer of goods or services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. An early form of trade, barter , saw the direct exchange of goods and services for other goods and services. As a result, buying can be separated from selling , or earning. The invention of money and later of credit , paper money and non-physical money greatly simplified and promoted trade.

Trade between two traders is called bilateral trade , while trade involving more than two traders is called multilateral trade. In one modern view, trade exists due to specialization and the division of labor , a predominant form of economic activity in which individuals and groups concentrate on a small aspect of production, but use their output in trades for other products and needs. For example: different regions' sizes may encourage mass production. In such circumstances, trade at market prices between locations can benefit both locations.

Retail trade consists of the sale of goods or merchandise from a very fixed location [3] such as a department store , boutique or kiosk , online or by mail , in small or individual lots for direct consumption or use by the purchaser.

Historically, openness to free trade substantially increased in some areas from to the outbreak of World War I [ citation needed ] in Trade openness increased again during the s, but collapsed in particular in Europe and North America during the Great Depression of the s. Trade openness increased substantially again from the s onwards albeit with a slowdown during the oil crisis of the s.

Economists and economic historians [ which? Commerce is derived from the Latin commercium , from cum "together" and merx , "merchandise. Trade originated with human communication in prehistoric times.

Trading was the main facility of prehistoric people, [ citation needed ] who bartered goods and services from each other before the innovation of modern-day currency. Peter Watson dates the history of long-distance commerce from circa , years ago. In the Mediterranean region the earliest contact between cultures involved members of the species Homo sapiens , principally using the Danube river, at a time beginning 35,—30, BP.

Some [ who? Apart from traditional self-sufficiency , trading became a principal facility of prehistoric people, who bartered what they had for goods and services from each other.

Trade is believed [ by whom? There is evidence of the exchange of obsidian and flint during the stone age. Trade in obsidian is believed [ by whom?

The earliest use of obsidian in the Near East dates to the Lower and Middle paleolithic. Robert Carr Bosanquet investigated trade in the Stone Age by excavations in Archaeological evidence of obsidian use provides data on how this material was increasingly the preferred choice rather than chert from the late Mesolithic to Neolithic, requiring exchange as deposits of obsidian are rare in the Mediterranean region.

Obsidian is thought [ by whom? Obsidian was traded at distances of kilometres within the Mediterranean region. Trade in the Mediterranean during the Neolithic of Europe was greatest in this material. The Sari-i-Sang mine in the mountains of Afghanistan was the largest source for trade of lapis lazuli.

Ebla was a prominent trading centre during the third millennia, with a network reaching into Anatolia and north Mesopotamia. Materials used for creating jewelry were traded with Egypt since BCE. Long-range trade routes first appeared in the 3rd millennium BCE, when Sumerians in Mesopotamia traded with the Harappan civilization of the Indus Valley.

The Phoenicians were noted sea traders, traveling across the Mediterranean Sea , and as far north as Britain for sources of tin to manufacture bronze. For this purpose they established trade colonies the Greeks called emporia. From the beginning of Greek civilization until the fall of the Roman Empire in the 5th century, a financially lucrative trade brought valuable spice to Europe from the far east, including India and China. Roman commerce allowed its empire to flourish and endure.

The latter Roman Republic and the Pax Romana of the Roman empire produced a stable and secure transportation network that enabled the shipment of trade goods without fear of significant piracy , as Rome had become the sole effective sea power in the Mediterranean with the conquest of Egypt and the near east. In ancient Greece Hermes was the god of trade [42] [43] commerce and weights and measures, [44] for Romans Mercurius also the god of merchants, whose festival was celebrated by traders on the 25th day of the fifth month.

Free trade between states was stifled by the need for strict internal controls via taxation to maintain security within the treasury of the sovereign, which nevertheless enabled the maintenance of a modicum of civility within the structures of functional community life.

The fall of the Roman empire and the succeeding Dark Ages brought instability to Western Europe and a near-collapse of the trade network in the western world. Some trade did occur in the west. For instance, Radhanites were a medieval guild or group the precise meaning of the word is lost to history of Jewish merchants who traded between the Christians in Europe and the Muslims of the Near East. The first true maritime trade network in the Indian Ocean was by the Austronesian peoples of Island Southeast Asia , [50] who built the first ocean-going ships.

Indonesians , in particular were trading in spices mainly cinnamon and cassia with East Africa using catamaran and outrigger boats and sailing with the help of the Westerlies in the Indian Ocean. This trade network expanded to reach as far as Africa and the Arabian Peninsula , resulting in the Austronesian colonization of Madagascar by the first half of the first millennium AD.

It continued up to historic times, later becoming the Maritime Silk Road. The emergence of exchange networks in the Pre-Columbian societies of and near to Mexico are known to have occurred within recent years before and after BCE.

Trade networks reached north to Oasisamerica. There is evidence of established maritime trade with the cultures of northwestern South America and the Caribbean. During the Middle Ages , commerce developed in Europe by trading luxury goods at trade fairs. Wealth became converted into movable wealth or capital. Banking systems developed where money on account was transferred across national boundaries. Hand to hand markets became a feature of town life, and were regulated by town authorities.

Western Europe established a complex and expansive trade network with cargo ships being the main workhorse for the movement of goods, Cogs and Hulks are two examples of such cargo ships. The English port city of Bristol traded with peoples from what is modern day Iceland, all along the western coast of France, and down to what is now Spain. During the Middle Ages, Central Asia was the economic center of the world.

They were the main caravan merchants of Central Asia. From the 8th to the 11th century, the Vikings and Varangians traded as they sailed from and to Scandinavia. Vikings sailed to Western Europe, while Varangians to Russia.

The Hanseatic League was an alliance of trading cities that maintained a trade monopoly over most of Northern Europe and the Baltic , between the 13th and 17th centuries. Vasco da Gama pioneered the European Spice trade in when he reached Calicut after sailing around the Cape of Good Hope at the southern tip of the African continent.

Prior to this, the flow of spice into Europe from India was controlled by Islamic powers, especially Egypt. The spice trade was of major economic importance and helped spur the Age of Discovery in Europe. Spices brought to Europe from the Eastern world were some of the most valuable commodities for their weight, sometimes rivaling gold.

From onward, kingdoms in West Africa became significant members of global trade. Founded in , the Bengal Sultanate was a major trading nation in the world and often referred to by the Europeans as the richest country to trade with. In the 16th and 17th centuries, the Portuguese gained an economic advantage in the Kingdom of Kongo due to different philosophies of trade. According to economic historian Toby Green , in Kongo "giving more than receiving was a symbol of spiritual and political power and privilege.

In the 16th century, the Seventeen Provinces were the center of free trade, imposing no exchange controls , and advocating the free movement of goods.

Trade in the East Indies was dominated by Portugal in the 16th century, the Dutch Republic in the 17th century, and the British in the 18th century. It criticized Mercantilism , and argued that economic specialization could benefit nations just as much as firms. Since the division of labour was restricted by the size of the market, he said that countries having access to larger markets would be able to divide labour more efficiently and thereby become more productive.

Smith said that he considered all rationalizations of import and export controls "dupery", which hurt the trading nation as a whole for the benefit of specific industries. In , the Dutch East India Company , formerly the world's largest company, became bankrupt , partly due to the rise of competitive free trade. In , David Ricardo , James Mill and Robert Torrens showed that free trade would benefit the industrially weak as well as the strong, in the famous theory of comparative advantage.

In Principles of Political Economy and Taxation Ricardo advanced the doctrine still considered the most counterintuitive in economics :. The ascendancy of free trade was primarily based on national advantage in the mid 19th century. That is, the calculation made was whether it was in any particular country's self-interest to open its borders to imports.

John Stuart Mill proved that a country with monopoly pricing power on the international market could manipulate the terms of trade through maintaining tariffs , and that the response to this might be reciprocity in trade policy. Ricardo and others had suggested this earlier.

This was taken as evidence against the universal doctrine of free trade, as it was believed that more of the economic surplus of trade would accrue to a country following reciprocal , rather than completely free, trade policies. This was followed within a few years by the infant industry scenario developed by Mill promoting the theory that the government had the duty to protect young industries, although only for a time necessary for them to develop full capacity.

This became the policy in many countries attempting to industrialize and out-compete English exporters. Milton Friedman later continued this vein of thought, showing that in a few circumstances tariffs might be beneficial to the host country; but never for the world at large.

The Great Depression was a major economic recession that ran from to the late s. During this period, there was a great drop in trade and other economic indicators. The lack of free trade was considered by many as a principal cause of the depression causing stagnation and inflation.

Also during the war, in , 44 countries signed the Bretton Woods Agreement , intended to prevent national trade barriers, to avoid depressions. It set up rules and institutions to regulate the international political economy : the International Monetary Fund and the International Bank for Reconstruction and Development later divided into the World Bank and Bank for International Settlements. These organizations became operational in after enough countries ratified the agreement.

In , 23 countries agreed to the General Agreement on Tariffs and Trade to promote free trade. The European Union became the world's largest exporter of manufactured goods and services, the biggest export market for around 80 countries.

Today, trade is merely a subset within a complex system of companies which try to maximize their profits by offering products and services to the market which consists both of individuals and other companies at the lowest production cost. A system of international trade has helped to develop the world economy but, in combination with bilateral or multilateral agreements to lower tariffs or to achieve free trade , has sometimes harmed third-world markets for local products.

Protectionism is the policy of restraining and discouraging trade between states and contrasts with the policy of free trade. This policy often takes the form of tariffs and restrictive quotas. Protectionist policies were particularly prevalent in the s, between the Great Depression and the onset of World War II.

A letter of credit (LC), also known as a documentary credit or bankers commercial credit, Letters of credit are used extensively in the financing of international trade, where the reliability of contracting parties Credits are made transferable when the original beneficiary is a "middleman", who does not supply the documents. Understanding the key points of trade financing can help you grow your give a business loan to the exporter while still processing the payment made by the.

As trade finance evolves, it is important to focus on both short-term incremental improvements to processes and longer-term innovations such as blockchain, says Dermot Canavan, head of Trade Finance Services, Product Management at ING Wholesale Banking. Trade finance has existed for hundreds of years, if not millennia. As long as there has been trade between countries, there has been a need for companies and financial institutions to manage the risks associated with a process that, by definition, takes place in locations where the buyer or seller has limited visibility and in circumstances where they may not have a strong relationship with their counterparty. Necessarily, the practicalities of managing those uncertainties are complex and often cumbersome.

No account yet?

A portion of the disclosure of this patent document contains material which is to subject to copyright protection. The copyright owner has no objection to the facsimile reproduction by anyone of the patent document or patent disclosure, as it appears in the Patent and Trademark Office patent file or records, but otherwise reserves all copyright rights whatsoever. The present invention relates to a method of trade financing, which is particularly, but not exclusively, suitable for use in financing international trade between a buyer and a seller resident in different countries, and to computerized systems for implementing the method.

US7155409B1 - Trade financing method, instruments and systems - Google Patents

Laurence Fletcher in London. Blockchain technology could radically shake up trade finance, one of the most archaic corners of the financial world, by reducing its reliance on paper documents. On average, a cross-border transaction requires the exchange of 36 documents and copies, says Kerstin Braun, president of Stenn Group, which provides trade finance. By , experts suggest blockchain could provide a digital record of transactions. Trade finance bridges the gap between when an exporter ships a consignment of goods and the time an importer pays for it. Banks shoulder the interim risk, such as if the importer does not or cannot pay, and finance the transaction for a fee.

US7047219B1 - Trade finance automation system - Google Patents

The international markets for United States manufacturers, traders, and exporters have grown tremendously in recent years, and this growth has principally been fueled by new technology. Such growth has also included the development of new and varied distribution channels. All of this has placed a great strain on existing finance methods and departments to deal with accounts-receivable problems. Foreign and domestic buyers insist that manufacturers, traders and exporters sell products to them on open account receivables terms. Original equipment manufacturers OEM's , distributors, and resellers are also seeking extended payment terms to allow themselves enough time to install and collect from the end user before having to pay the manufacturer. New systems are needed that can reduce the credit exposure to foreign and domestic buyers, accelerate cash flow, improve and manage balance sheet efficiency ratios, etc. Requests for extended payment terms need to be accommodated, while avoiding high credit exposure, increased days sales, outstanding DSO and the offering of excessive cash discounts to accelerate collections. Such improved systems would be used to facilitate revenue recognition, and provide an overall increase in the return-on-capital.

It is variably called crowd-based capitalism, the sharing economy, and the gig economy. This concept of the future of work poses a challenge for economists, government regulators and educators for 4 reasons:.

Trade involves the transfer of goods or services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. An early form of trade, barter , saw the direct exchange of goods and services for other goods and services.

The ABC of trade finance fintech

A letter of credit LC , also known as a documentary credit or bankers commercial credit , or letter of undertaking LoU , is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. Letters of credit are used extensively in the financing of international trade , where the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as an underwriter , where it assumes the counterparty risk of the buyer paying the seller for goods. The letter of credit has been used in Europe since ancient times. The International Chamber of Commerce oversaw the preparation of the first Uniform Customs and Practice for Documentary Credits UCP in , creating a voluntary framework for commercial banks to apply to transactions worldwide. In the late 19th century and early 20th century, travelers commonly carried a circular letter of credit issued by a relationship bank, which allowed the beneficiary to withdraw cash from other banks along their journey. This type of letter of credit was eventually replaced by traveler's checks , credit cards and automated teller machines. Although letters of credit first existed only as paper documents, they were regularly issued by telegraph in the late 19th century, and by telex in the latter half of the 20th century. UCP Revision regulates common market practice within the letter of credit market. It defines a number of terms related to letters of credit which categorise the various factors within any given transaction. These are crucial to understanding the role financial institutions play within.

Letter of credit

Trade finance makes import and export transactions possible for entities ranging from a small business importing its first private-label product from overseas, to multi-national corporations importing or exporting large amounts of inventory around the globe each year. Even with a confirmed order for products, many banks won't provide loans or overdraft protection for these types of transactions. Business owners, both small and large, don't want their own money tied up in shipments of goods that could take four to six weeks or more to arrive from an overseas manufacturer. On the flip side, companies that export large amounts of goods can't necessarily afford to wait until their export products have arrived at some distant destination weeks later before receiving payment. Some sources estimate that over 80 percent of global trade depends on trade financing, which helps goods keep moving even when companies don't have enough cash flow internally to finance the transactions themselves. Trading intermediaries, such as banks and other financial institutions, oversee and facilitate different financial transactions between a buyer importer and a seller exporter. These transactions can take place domestically or internationally. The availability of trade financing has spawned huge growth in international trade. Trade finance covers different types of activities including issuing letters of credit, lending, forfaiting, export credit and financing , and factoring.