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  • 10.10.2-RISK AND THE RELATION TO TRADE CREDIT-MODERN COLLATERAL MANAGEMENT FACILITATES CREDIT

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  • Modern collateral management facilitates credit

     
     
    Collateral management in coffee producing countries is a logical extension of the traditional 'supervision' business of independent verifiers and sworn weighers. Where previously such companies certified that goods loaded on ships were of the prescribed quality and weight, they now begin the verification process at the very first point in the collection marketing chain. Modern collateral management increasingly means that a single company coordinates all the logistics, guarantees the integrity of the physical circuit, and provides security over the export documentation process, thus eliminating all unsecured gaps. In other words, they are in the business of 'moving collateral'. As such they can play an essential role in the financing of coffee traders and processors or exporters, especially where the same bank is financing both the end-user and the exporter.

    Some international CMs provide complete packages, linking customers with lending institutions on the strength of the CM's performance guarantee, based on standard packages and procedures which they apply worldwide. And as the coffee trade moves into the paperless trade with electronic documents of title and so on, so the role of the CM will take on more importance.