Distinguish between Pre-Shipment Finance and Post-Shipment Finance? Explain various methods of Post-Shipment finance available to Indian Exporters.

Pre-shipment Finance:

Pre-shipment finance refers to the financial assistance provided to the exporters before actual shipment of goods. Pre-shipment finance is provided to the exporters for the purposes like purchase of raw materials, their processing and converting into finished goods and packaging them.

For these purposes, the following pre-shipment finance is made available:

1. Packaging credit

2. Advance against Incentives

3. Advance against Duty Drawback.

Pre-shipment credits are granted by the banks under concessional rates of interest at 7.5 per cent. Credit can be extended up to a maximum period of 6 months.

Post-Shipment Finance:

Post-shipment finance may be as “any loan or advance granted or any other credit provided by a bank to an exporter of goods from India from the date of extending the credit after shipment of goods to the date of realization of export proceeds.”

Thus, post-shipment finance serves as bridge loan for the period between shipment of goods and the realization of proceeds. Such loan is usually provided for a maximum period of 6 months. Interest is charged at the rate of 8.65 per cent.

Business involves risk but export business is more prone to risks. With a view to reduce risk element in export business, the government has set up the Export Credit and Guarantee Corporation (ECGC) which ______ __________ ____ _____ __________.
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