Matthew N. Clarke

Mr. Matthew N. Clarke and Mr. Davis Daniels
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Mr. Mathew N. Clarke is the senior vice-president for Trade and Finance at the LBDI. He explains to this columnist why the bank chose to introduce this service and how letter of credit protects the importer and the exporter in international trade. The Liberian banker first began by defining what a letter of credit is. "Letter of credit (LC) is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. He said in the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase.

According to Mr. Clarke, letter of credit involves three main persons, the importer, the exporter and the banks. He said the advising bank is normally considered the importer's bank while the supplier's bank is the exporter's bank. Mr. Clarke pointed out that introduction of the letter of credit at LBDI signals the bank's readiness to support the growth of the domestic economy by protecting and linking business people in the country to foreign banks. He pointed out that this link would also be extended between the Liberian importers and the manufacturing foreign companies in developed countries.

One of the main points Mr. Clarke considered as an advantage to business people obtaining a letter of credit is that it is often used in international transactions to ensure that payment will be received. Owing 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 letter of credit has become a very important aspect of international trade. Hear Mr. Clarke: "The bank also acts on behalf of the buyer (holder of letter of credit) by ensuring that the supplier will not be paid until the bank receives a confirmation that the goods have been shipped."

He disclosed that business people had for the last 15 years or so imported goods into the country when banks were not offering LC services and noted that such importations were covered with high risks. "They talked on the counters, send their money and did pre-shipments, a risky venture," he stated.

Another thing importers were doing, he said, was that they had an arrangement with the exporting parties that allowed them (the importers) not to pay until the goods were cleared from the receiving port. But with the LC, he said it is a fair ball game where pre-shipment inspection is done at the request of the importing party. "You have a supplier who would refuse to supply his goods to Liberia because he does not know anyone in the country," he observed. He indicated that without the LC, the importing party would have nobody to review neither the goods nor the document before importing.

Another added advantage for the importers who use LC, he stated, is that they can expand their source of supply, meaning, they can buy from any exporter of their choice because there are bank guarantees. "You don't also have to send your cash to the exporter for 90 days and you can transact business with your money within that time period before paying the bank for your goods," he added.

Mr. Clarke called on Liberian business people to take advantage of the LC service being offered by the bank.

At the close of the interview with Mr. Clarke, this columnist caught up with Ambassador Davis Daniels, a beneficiary of the LC service being offered by the LBDI.

Matthew N. Clarke Sr. VP / WU & Marketing. matthew.clarke@lbdi.net