To reduce reliance on foreign institutions in the export process, Bangladesh Bank has taken a new initiative that will allow exporters to use local insurance coverage under the open account method.

In a circular issued on Tuesday (October 7), Bangladesh Bank has permitted banks to accept payment risk coverage from local insurance companies, a shift from the earlier rule that required such coverage only from foreign banks or financial institutions.

According to the new directive, banks can now accept payment undertakings or risk coverage from domestic insurance companies. Previously, only foreign entities could provide such guarantees for exports under the open account method.

Under the revised policy, exporters will be allowed to export goods on an open account basis backed by foreign currency-denominated insurance policies issued by local insurance companies. However, if export proceeds are not repatriated, the insurance claim must be settled in foreign currency.

Additionally, insurance companies will be permitted to obtain reinsurance from abroad under their respective regulatory frameworks, if needed.

The most significant change is that exporters no longer require payment guarantees from foreign banks or institutions to export under the open account system. Now, similar payment security from domestic insurers will also be accepted.

The circular also states that the insurance policy must be issued in foreign currency, and in case export proceeds are not realized, insurers must settle the claim in the same currency. Reinsurance from foreign companies is allowed in compliance with local insurance regulations.

Moreover, banks can now also offer post-shipment financing against exports covered by local insurance policies.

Exporters and stakeholders believe this policy shift by Bangladesh Bank will reduce over-dependence on foreign institutions, increase flexibility in trade financing, and enhance competitiveness of Bangladeshi exporters in global markets.