export credit

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The system of selling exports on credit rather than for cash payment. Exports of commodities and consumer goods are frequently financed by trade bills, or short-term credit. These are normally payable in 3 or 6 months, giving the buyer time to ship goods and distribute them for resale, thus providing the money to pay the bills. If the seller needs immediate cash, bills can be discounted, that is sold to discount houses. Producer goods normally need longer-term credit. This may be given by the sellers, or by intermediary financial institutions. The length of credit available is an important factor affecting the marketability of capital goods exports. Many countries promote their exports by providing either subsidized export credit, or guarantees on more favourable terms than can be obtained commercially. Export credits are governed by international agreement between the member countries of the Organization for Economic Cooperation and Development.

Subjects: Economics.

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