Most credit professionals who weighed in on how they do business in the Middle East and Africa, using FCIB’s latest survey, conduct business with existing customers in these countries. Wire transfer, letters of credit (L/C) and cash against documents were some of the more popular ways they secure payments.
Survey takers who sell into Pakistan contributed payment delays to billing disputes and determined customers’ creditworthiness based on customer visits, international credit reports and international country risk reports. Purchase orders were used to confirm or finalize sales before shipping goods.
“They need to get an irrevocable L/C draft and work with the customer to define terms to avoid additional expenses before the customer submits the L/C,” wrote one respondent. Another shared that the “sales team needs to be strong and do a lot of the legwork for you because some company policies do not allow travel to Pakistan.”
Regulatory issues followed by foreign exchange rates, unwillingness to pay and cash flow issues were noted as reasons for payment delays in South Africa. “Customers will provide financials if pushed,” a survey taker said. “Most of our customers there pay us well.” Another commentor cautioned, however, “Understand the industry you are supporting. Some industries may have additional risks.”
Regarding Egypt, difficult documentation requirements were noted as a concern. “Country risk is more important to monitor than individual customer risk,” another person said. “In the event of financial downfall or crash, the government may stop payments to foreign (outside Egypt) companies.”
Saudi Arabia was identified as a “challenging place to do business.” Some customers don’t like to pay even if they can, it was noted. “They are very willing to work via L/Cs, and it is often a typical or preferred way to do business.”
Concerns within the United Arab Emirates were similar to those identified in Saudi Arabia. “They will take as long as possible, or that you allow them, to pay. They have the money to pay and will pay. You just need to push them all the time.” Also, “Make sure that the customer that is applying for credit is from the UAE. We have experienced companies from other countries, opening up satellite offices in the UAE for tax reasons.”
Courtesy FCIB, a division of the National Association of Credit Management and FCIB-NACM, Inc.
