Bangladesh Bank has allowed exporters to use insurance coverage from local companies for shipments under open account credit terms.
It simplifies export procedures and reduces dependence on foreign institutions.
According to a circular issued by the central bank on Tuesday, authorised dealer banks can now arrange payment undertakings or payment risk coverage from Bangladeshi insurance companies for export transactions conducted under open account terms.
Previously, such exports were permitted only when backed by designated foreign institutions.
The new policy will enable exporters to secure coverage from local insurers through foreign currency-denominated insurance policies, ensuring that export claims are settled in foreign currency if payments are not received.
To manage exposure, insurance companies are required to obtain reinsurance coverage from foreign sources in line with regulatory rules, the circular said.
Under the guidelines, banks will pay insurance premiums from exporters鈥� Exporters鈥� Retention Quota (ERQ) accounts and may open foreign currency accounts for insurance companies to handle premium receipts, reinsurance payments, and claim settlements.
Any unutilised balance in those accounts must be converted to local currency and transferred to the respective insurers鈥� taka accounts.
The circular also allows banks to provide post-shipment or early payment financing to exporters against insurance-backed exports, including through their offshore banking units.
BB officials said that the move would enhance flexibility and competitiveness for Bangladeshi exporters, especially small and medium-sized firms that often struggle to secure costly payment guarantees from foreign institutions.
By involving local insurers, exporters can manage risks domestically while retaining faster access to financing through local banks.
Export under open account terms means goods are shipped before payment is made, with the buyer agreeing to pay within a specified period.
Such arrangements are common in global trade but carry payment risks. The inclusion of local insurance-backed coverage now provides exporters with an added layer of security, making the system more efficient and accessible.
Economists and exporters have long urged the central bank to diversify trade finance instruments and reduce reliance on letters of credit (LCs), which involve lengthy documentation and higher costs.
The latest decision is expected to broaden export financing options.
