The Berhan Bank offers Letter of Guarantee facility, bank letter of guarantee facility is a written promise/irrevocable obligations by the Bank to compensate (pay a sum of money) to the beneficiary (local or foreign) in the event that the obligor fails to honor his/her/its obligations in accordance with the terms and conditions of the guarantee/agreement/contract.
1.A letter of guarantee facility could be of a one time or renewable
– A one-time letter of guarantee is a non-renewable letter of guarantee extended to applicants who make single transaction at a time.
– Renewable letter of guarantee is a form of credit facility where the limit is renewed periodically when the customer fulfills the Bank’s requirement.
2.Any letter of guarantee facility request shall require full collateral coverage.
3.Regarding the terms and conditions of the contract concluded between the beneficiary and the obligor, the Bank’s attorney shall check the document to protect the interest of the Bank.
4.The facility shall be availed for one year but can be renewed every year unless the Bank has sufficient reason not to renew.
5.The Bank provides guarantee services to both local and foreign customers.
6. A foreign-currency permit from the NBE should, however, be obtained for any form of guarantee that the Bank is requested to issue in favor of foreign beneficiaries.
7.The duration (term) of any guarantee instrument will depend on the contractual agreement signed by the parties involved in the guarantee contract. Nevertheless, the Bank shall not provide guarantee backing for a contractual agreement that exceed two years.
Issuance of Letter of Guarantee
The Bank may issue a letter of guarantee in favor of beneficiary under any of the following situations:
1.When a local customer requests the Bank to issue a letter of guarantee in local currency to a local beneficiary,
2.When a local customer requests the Bank to issue a letter of guarantee in a foreign currency to a foreign beneficiary;
3.When a correspondent bank requests the Berhan Bank to issue a guarantee in favor of a local beneficiary, the international banking wing shall process same ensuring that the Bank is fully secured against any possible danger.
Bid/tender bonds are guarantees issued by the Bank in favor of a designated beneficiary upon the request of the bidder, representing the commitment of the Bank to meet the claims that may be made by the beneficiary in the event that the bidder who purchased the guarantee from the Bank withdraws from the bid during the bid period or fails to accept the award when he/she/it becomes the winner.
SUPPLIERS’ CREDIT GUARANTEE
Suppliers’ credit guarantees are guarantees issued by the Bank to provide security to a local or foreign supplier/beneficiary on behalf of a local customer (debtor), representing a commitment on the part of the Bank to meet any claims to be made by the beneficiary, in case the debtor (local buyer) fails to repay in accordance with the terms and conditions of the contract.
ADVANCE PAYMENT GUARANTEE
An advance payment guarantee is a guarantee issued by the Bank in favor of a buyer who makes the advance, upon the request of the seller or the contractor who received the advance, representing a commitment on the part of the Bank to repay the sum, in case the seller or the contractor fails to honor the contract terms in their entirety, or in part, and the seller, or the contractor, does not himself/herself/itself return the advance.
A performance bond is a type of guarantee that the Bank issues in favor of a bid organizer (beneficiary) at the request of the bid winner to meet any claims to be made by the beneficiary, in case the bid winner fails to deliver the goods or to perform the services in accordance with the terms and conditions of the contract.
Retention guarantees are guarantees issued by the Bank in favor or the party accepting to release retained money, upon the request of a seller or contractor, to provide security to a beneficiary, in the event that the seller or the contractor fails to perform his/her/its obligation as per the terms and conditions of the contract.
CUSTOMS DUTY GUARANTEE
These are guarantees issued by the Bank in favor of the customs authority (the beneficiary) to meet the requests of the beneficiary in respect of customs duties in circumstances where the goods imported without payment of customs duties are not re-exported and the respective customs duties have not been paid.
STEAMERS’ GUARANTEES/LETTERS OF INDEMNITY FOR MISSING DOCUMENTS
These guarantees are issued by the Bank at the request of the buyer in favor of a carrier, in circumstances where the bill of lading is missing/ delayed but the goods/cargo/arrive earlier.