Banking instruments for trade finance

Documentary operations are time-tested and practice-proven procedures used in international trade. They ensure not only the execution of payments but also the successful completion of the transaction. These operations help reduce business risks and provide additional guarantees.

The advantages of documentary operations include:
• payments are made only for shipped goods, completed work, and provided services;
• minimization of non-payment risks for delivered goods;
• formation of high-quality accounts receivable;
• avoidance of advance payments or prepayments;
• possibility of obtaining financing.

However, in most cases, Belarusian business entities – when carrying out both domestic and international settlements – prefer methods they consider clear and proven, such as advance payments or prepayments, using either their own or borrowed funds. Ultimately, this becomes one of the factors contributing to the growth of overdue accounts receivable.
Over the past year, banks and the Development Bank of the Republic of Belarus carried out approximately 5,600 documentary transactions. The majority of these were bank guarantees – accounting for over 78% – with letters of credit making up around 20%. The volume of collection operations was insignificant.

The infrastructure of the bank guarantee market is evolving in the Republic, promoting the transition of participants to electronic interaction.

Since 2017, the Register of Bank Guarantees has been in operation.

Since 2019, electronic bank guarantees have been issued in favor of customs authorities. At present, nearly 100% of such guarantees are issued in electronic form. At present, nearly 100% of such guarantees are issued in electronic form.

The mechanism for electronic interaction on bank guarantees in favor of tax authorities was launched in 2022.

Since 2025, an electronic interaction mechanism is operational for bank guarantees used in tenders and public procurement on the trading platforms of the Belarusian Universal Commodity Exchange and the National Center for Marketing and Price Study.

Overall, more than half of all bank guarantees issued last year were in the form of electronic documents.

The area related to the use of guarantees issued by Belarusian banks in public (municipal) procurement in the Russian Federation is developing successfully.

To support exporting enterprises participating in public (municipal) procurement in the Russian Federation, Belarusian banks issued 97 guarantees in 2024 under an intergovernmental agreement on the mutual recognition of bank guarantees, totaling over 2 billion Russian rubles –nearly double the amount issued the previous year.

Currently, eight Belarusian banks are authorized to issue such guarantees.

In addition to issuing guarantees for the eight federal electronic platforms that conduct public procurement auctions, guarantor banks have also gained the ability to issue guarantees for over 370 Russian electronic platforms that organize purchases, competitions, and tenders.

To further advance the development of banking instruments for trade finance, the Association of Trade Finance Professionals was established in 2023. In April of the following year, it became a member of the International Chamber of Commerce, headquartered in Paris, and began participating in the work of its Banking Commission.

Considering that the methodology for documentary operations is largely based on international rules and practices, membership in the Association provides methodological and practical support, consultations, training for bank personnel and clients, as well as participation in international events.

As for regulation, the Republic of Belarus has established the necessary legal framework for the application of documentary operations.

On January 1, 2024, amendments to the Banking Code of the Republic of Belarus came into force, introducing the concepts of “microletter of credit” and “microguarantee.”

To further develop the provisions of the Banking Code, corresponding amendments were made to the Instruction on the Procedure for Conducting Documentary Operations. Banks have been granted the right to independently determine the specifics of opening a microletter of credit and issuing a microguarantee, and a limit has been set for each microproduct in the amount of 25,000 base units.

Work is nearing completion on the Instruction on the Procedure for Forming and Using Special Reserves to Cover Potential Losses on Assets and Off-Balance Sheet Transactions. The concept of a “portfolio of homogeneous assets” is being introduced, which, in addition to loans, will include liabilities arising from the bank’s fulfilled obligations under bank guarantees and letters of credit. At the same time, the total amount of all claims and contingent liabilities of the bank to a debtor must not exceed 50,000 base units.

Another important innovation introduced by amendments to the Civil and Banking Codes is the possibility of opening an escrow account. Although the opening of such an account is not considered a documentary operation, its operating regime bears some resemblance to letters of credit and collection.

An escrow account implies that funds deposited into it are held for the purpose of being transferred to a third party (the beneficiary) upon the occurrence of certain conditions.

A key feature of this account’s operation is the immunity provided by the Banking Code from suspension of operations, seizure, or enforcement actions against the funds held in the escrow account.

Thus, it can be stated that Belarus has created the necessary conditions for the application of documentary operations, including banking instruments of trade finance.

We believe that expanding the use of documentary operations is possible through jointly solving the following tasks.

For clients, this means including provisions in contracts for the use of trade finance instruments.

For banks, this involves increasing the accessibility of documentary operations, simplifying the processes and procedures related to opening letters of credit and issuing bank guarantees, and promoting trade finance instruments to clients, including their use in foreign trade activities.

Their cost also plays an important role. It is clear that these are complex products, but clients must have a clear understanding of the total cost of a banking operation.

Solving the outlined tasks will contribute to the growth in the number and volume of documentary operations.