Azizi Bank: Short Introduction
Azizi Bank was founded in Afghanistan in 2006 and is serving the country for more than a decade. Azizi Bank customers can receive banking services, such as credit, loans and deposits facilities. Along the years, Azizi Bank has been working to serve the nation with its state of the art customer service and robust technology. The bank follows the international best practices in rendering services to its customers and today it stands as the largest banking group in the Islamic Republic of Afghanistan.
Trade Finance & Credit Facilities: 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 the fund based & non fund based facilities. Azizi Bank contributes to almost 30% of the overall credit & lending business in the country. 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 firstname.lastname@example.orgemail@example.com
Types of Azizi Bank Credit facilities
Azizi Bank delivers two types of credit facilities: Fund-based and non-fund based facilities. Each of these facilities has its own advantages and our esteemed customers could be granted to any of them according to their needs.
Through fund-based facilities/cash loans, Azizi Bank commits the physical outflow of funds at a competitive cost and funds are disbursed once customer completes necessarily terms and conditions. These type of loans i.e.(i) working capital loans and (ii) term loans are sanctioned to those who carry out day to day business and are also engaged in procurement of assets for business use.
Azizi Bank provides all kinds of non-fund based credit facilities i.e. letters of credit and financial/performance guarantees) and it is dedicated to businesses, investments, and import/export.
First Part: Azizi Bank Fund-Based Facilities
Azizi Bank fund-based facilities/cash loans are dedicated to all the eligible individuals who have requirements of money for conducting of business. After an individual is referred to the Credit Department of Azizi Bank, he/she will be briefed about the various types of loans, its advantages, and specifications and related documents and conditions. Subsequently the individual can pick the specific type of fund-based facilities and customize it accordingly. Azizi Bank Fund-based facilities includes: Overdraft Loans (ODs), Term loans (long-term/medium term short-term) and Individual/ personal Loans.
Azizi Bank Overdraft (O/D) scheme is designed for allowing monetary and financial facilities to institutions and organizations which helps in managing their day to day working requirements. Accordingly, the bank has estimated a credit limit and allows the client to borrow a certain amount from the bank. The customer can utilize the limit sanctioned on the OD account and can either credit the sale proceeds on the same day without incurring any interest costs or on subsequent days. Interest is charged on the daily balance outstanding at the end of the day.
a) Characteristics of Overdraft Loans
b) Overdraft Loans required documents
In case of settlement over the use of this facility, the consumer should hand over the following documents to Azizi Bank Credit Department:
c) How to get an Overdraft
Customers who wishes to avail the OD facility may either contact our 24 hours call center @ 1515 or +93 70 780 1515 or visit any of our branches or may direct visit the credit department located in Azizi Bank HO, Zanbaq Square, Kabul, Afghanistan. After the specified documents are received, the verification department scrutinizes all the papers, make the KYC verifications and a decision is taken through the committee depending on the size of the facility.
2. Term Loans
A Term Loan is a loan from the bank following an agreement for a specific amount of facility which has a specified repayment schedule and a fixed or floating margin rate. Obtaining a long term loan provides a business entity with requisite capital that can be used to purchase assets, inventory or equipment/s which can then be used to create additional income for the business.
(I) Long Term Loans
Such loan facilities are considered for more than one year. Long term loan facility is suitable for those who intend to invest capital for a long term in order to generate long term facilities.
Long term loans are suggested to purchase fixed assets, construction of commercial buildings, construction of manufacturing factories, purchase of vehicles, stocks, raw material etc. As mentioned, such loans are repayable in a fixed term. The repayment tenure is between 12 to 36 months, but if the loan is expected to finance large projects, it can be extended to more than 60 months. The tenure and the amount of repayment of the loan are fixed according to the margin rate and income coverage ratio on fixed debt.
a) Characteristics of long-term Loans
b) Documents required for long term loans
In case of settlement, the consumer should provide the following documents to the Credit Department of Azizi Bank:
c) How to get a long term loan?
Customers who wishes to avail the long term loan facility may either contact our 24 hours call center @ 1515 or +93 70 780 1515 or visit any of our branches or may direct visit the credit department located in Azizi Bank HO, Zanbaq Square, Kabul, Afghanistan. After the stipulated documents are received, the verification department scrutinizes all the papers, make the KYC verifications and a decision is taken through the committee depending on the size of the facility.
(II) Azizi Bank Mid-Term Loans
Contrary to long term loan, mid-term loan is for a shorter duration and lesser amount as compared to long term and is recommended for mid-term investments.
(III) Azizi Bank Public (General) Loans
Public loans are designated to all the eligible individuals. Margin for such loans is less and the debtor is obligated to repay the amount on a specified repayment schedule at a fixed or floating margin rate. Public loans are recommended for construction of personal properties, small business and other personal needs.
a) Characteristics of Public loans
In case of settlement, the consumer should provide following documents to the Credit Department of Azizi Bank:
Second Part: 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.
(I) 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, participation 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.
a) 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.
Characteristics of Bid Guarantee
How to get Bid Guarantee?
In order to get Bid Guarantee, consumer should provide the following
b) 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 fail to construct the building 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.
Characteristics of Performance Guarantee
How to get a Performance Guarantee?
Documents required are
c) Advance Payment Guarantee
A written document issued by Azizi Bank at the request of a 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.
Characteristics of Advance Payment Guarantee
How to get Advance Payment Guarantee?
Documents required are:
d) 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 its behalf. Azizi Bank can also issue Counter Guarantee to other Banks in other countries for specific projects
Characteristics of Counter Guarantee
How to get a Counter Guarantee?
Documents required are:
(II) 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 purchase, 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, differing 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 areissued through SWIFT
Azizi Bank issues different types of letter of Credit with lowest commission rates.
Elements of a Letter of Credit
Applicant: On behalf of a buyer (debtor)
Issuing Bank: The issuing banks' role is to provide a guarantee to the seller that if required documents are presented, the bank will pay the seller the amount due and to examine the documents, and only pay if these documents comply with the terms and conditions set out in the letter of credit.
Advising Bank: An advising bank, usually a correspondent bank of the issuing bank will advise the beneficiary of the L/C opened in favor. Generally, the beneficiary would want to use a local bank to ensure that the letter of credit is valid. In addition, the advising bank would be responsible for sending the documents to the issuing bank. The advising bank has no other obligation under the letter of credit. If the issuing bank does not pay the beneficiary, the advising bank is not obligated to make any payment.
Confirming Bank: The correspondent bank may confirm the letter of credit for the beneficiary. At the request of the issuing bank, the correspondent obligates itself to insure payment under the letter of credit. The confirming bank would not confirm the credit until it evaluates the country and bank where the letter of credit originated. The confirming bank is usually the advising bank.
Beneficiary: The beneficiary is entitled to be paid as long as he can provide the documentary evidence required by the letter of credit. The letter of credit is a distinct and separate transaction from the contract on which it is based. All parties deal in documents and not in goods. The issuing bank is not liable for performance of the underlying contract between the customers and beneficiary. The issuing bank's obligation to the buyer is to examine all documents to insure that they meet all the terms and conditions of the credit. Upon requesting demand for payment, the beneficiary warrants that all conditions of the agreement have been complied with. If the beneficiary (seller) confirms to the letter of credit, the seller must be paid by the bank.
Types of Letters of Credit
There are six different types of letters of credit (LCs) in Azizi Bank and all of them have its own specialties and specific functions. Azizi Bank is proud of providing these letters of credit in order to serve the customers in a better way.
1- Internal Letter of Credit: A Letter of Credit which is issued while both, the applicant and the beneficiary are located in one country.
2- External Letter of Credit: A Letter of Credit which is issued while both, the applicant and the beneficiary are not located in one country and its purpose is import and export.
3- Revocable Letter of Credit: a Letter of Credit which can be changed or cancelled by the bank that issued it at any time and for any reason.
4- Irrevocable Letter of Credit: A Letter of Credit which cannot be changed or cancelled unless everyone involved agrees. Irrevocable LCs provide more security than revocable ones.
5- Confirmed Letter of Credit: A second guarantee in addition to a letter of credit that commits to payment of the letter of credit. A confirmed letter of credit is typically used when the issuing bank of the letter of credit may have questionable creditworthiness and the seller seeks to get a second guarantee to assure payment.
6- Transferable Letter of Credit: A Letter of Credit that permits the beneficiary of the letter to make some or all of the credit available to another party, thereby creating a secondary beneficiary. The party that initially accepts the transferable LC from the bank is referred to as the first beneficiary. According to the law, such LCs cannot be transferable to a third beneficiary.
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.