Brief Introduction

Azizi Bank’s Credit Department has started its activities as an important section since the establishment of the bank. This department covers both fund based & non fund based facilities and extends various types of business and non-business loans to entrepreneurs and individuals to fulfill their credit requirements. For further details,

please visit the Credit Department, located at the main branch of Azizi Bank or call our 24 hours call center services @ 1515 or +93 70 780 1515 or email at cco@azizibank.af / dy.cco@azizibank.af

 Azizi Bank Non-Fund Based Facilities

Non fund based facilities includes the bank guarantees (BGs) of various types and letter of credit (LCs). The types and its procedural norms are explained below in detail.

Azizi Bank Guarantee Letters and their types

A bank guarantee is a promise from a bank or other lending or financial institution that if a particular borrower defaults on a loan/project, the bank will cover the loss. A bank guarantee enables the customer or debtor to acquire goods, buy equipment/s, participate in auction parties, bidding parties or draw loans, and thereby expand business activity. In general, there are four types of bank guarantees: Bid Guarantee, Performance Guarantee, Advance Payment Guarantee, and Counter Guarantee.

Bid Guarantee

A bid bond is a debt secured by a bidder for a project for e.g. construction job, logistics or similar type of bid –based selection process for the purpose of providing a guarantee to the project owner that the bidder will take up the job, if selected. The existence of a bid bond provides the owner with assurance that the bidder has the financial means & security to accept the job for the price quoted in the bid.

Bid bonds help the selection process of a job contract run smoothly. Without it, project owners would have apprehensions in the way of assurance that the bidder they select for a job would be able to properly complete the job without running into cash flow problems along the way. By providing bid bonds for their respective bids, each bidder for the projects is able to provide sufficient assurance to the owner that the project is within its means.

How to get Bid Guarantee?

• Board Resolution (Consent) for opening Bid bond Guarantee
• Valid Business License
• Article of Association (Assas Naama)
• Tazkira/Passport of President, V-President and shareholders of the company
• Project specifications
• Bid Form

Performance Guarantee

A Performance Guarantee is issued by Azizi Bank to a contractor to guarantee the full and due performance of the contract according to the plans and specifications. A project requiring a payment & performance bond will usually require a bid bond in order to qualify to bid for the project. A payment and performance bond will then be required of the winning bidder as a security to guarantee job completion. In case the contractor fails to perform their contractual obligation according to the specifications laid out by the contract, the client is guaranteed compensation for any monetary losses up to the amount of the performance bond.

How to get a Performance Guarantee?

Documents required are:

• Valid Business License
• Board Resolution (Consent) for opening of Performance bond
• Article of Association (Assas Naama)
• Tazkira/Passport of President, V-President and shareholders of the company
• Project specifications etc. along with copy of confirmed contract awarded to the beneficiary

Advance Payment Guarantee

A written document issued by Azizi Bank at the request of the customer to the owner of a contracted project or the buyer of a sales deal that guarantees that the applicant will fulfill the contractual obligations after the owner or the buyer makes advance payment. Through advance payment guarantee, advance payments will be returned if the party that receives such payments does not perform its part of the contract.

Advance Payment Guarantee How to get Advance Payment Guarantee?

Documents required are:

• Board Resolution (Consent) for opening of Advance payment Guarantee
• Valid Business License
• Article of Association (Assas Naama)
• Tazkira/Passport of President, V-President and shareholders of the company
• Project specifications
• Documents confirming the awarding of the project and upon the advance payment money guarantee being received by the Bank, depositing of the guaranteed money or immovable Guarantee, and a bank account with Azizi Bank (which is compulsory).

Counter Guarantee

Counter Guarantee is a technical word to indicate the guarantee given by a bank to another bank issuing a guarantee. It happens when in accordance with the legal provisions a foreign bank is not authorized to issue guarantee in favor of resident in a specific Country but only allowed to instruct a local bank to issue a bank guarantee on their behalf. Azizi Bank can also issue Counter Guarantee to other Banks in other countries for specific projects.

How Azizi bank can issue a bank guarantee on the back of counter guarantee?

Documents required are:

• Receipt of authenticated swift Message from counter bank requesting Azizi bank for issuance of a bank guarantee on behalf of their customers
• Valid Business License of the company
• Memorandum/Article of Association of the company
• Passport of President, V-President and shareholders of the company
• Last 3 years audited financial statements of the company
• In case of advance payment and performance guarantee, copy of contract award is needed

Azizi Bank Letters of Credit (LCs)

A Letter of Credit is a letter from Azizi Bank that guarantees a buyer's payment to a seller on time and for the specified amount after delivery of the goods within the due date and as per proper specifications. In the event that the buyer is unable to make payment on the purchased commodity, the L/C issuing bank will be required to cover the full or remaining amount of the purchase value. Due to the nature of international dealings, including factors such as distance, different laws in each country and difficulty in knowing each party personally, the use of letters of credit has become a very important aspect of international trade. They are issued through SWIFT (Society for World Wide interbank Financial Telecommunication) system.

Why use a letter of credit

Letters of credit are most commonly used when a buyer in one country purchases goods from a seller in another country. The seller may ask the buyer to provide a letter of credit to guarantee payment for the goods. The main advantage of using a letter of credit is that it can give security to both the seller and the buyer that it will honor their side of the deal and provide documentary proof of the same.

How to get Letter of Credit?

Documents required are:

• Board Resolution (Consent) for opening of letter of credit
• Valid Business License
• Article of Association (Assas Naama)
• Tazkira/Passport of President, V-President and shareholders of the company
• Proforma Invoice
• Sales/purchase contracts