How Local Currency Financing works, its benefits, and its main features.
Under the Local Currency Finance Scheme UK Export Finance guarantees a buyer credit loan to an overseas borrower in local currency to finance the purchase of capital goods and/or services, from an exporter carrying on business in the UK. Loans can be made in one of around 40 eligible currencies for contracts with a value of at least £5 million.
A buyer credit in local currency essentially follows the same format as a conventional buyer credit in a standard currency such as Sterling, Euros or US Dollars except that it is funded from a bank in the buyer’s country.
Local Currency Financing is particularly useful for projects which do not usually generate foreign currency revenue. For the overseas borrower (and buyer) it reduces foreign currency risk and avoids a variable debt service cost.
How to apply
Read the guide to the Buyer Credit Facility for details of how to apply.
Contact our customer service team to get help with Local Currency Financing.
How it works
The diagram shows how UK Export Finance guarantees a loan to a buyer that is purchasing capital or semi-capital goods/services from a UK exporter, financed in a local currency.
Benefits of local currency financing
The benefits of a buyer credit denominated in local currency are that:
- the buyer/borrower has time to pay over a number of years at fixed or floating rates and repays in local currency
- it is particularly suited to projects in sectors such as water/gas/electricity utilities, local transport, local municipalities which do not usually earn foreign currency revenue
- it reduces foreign currency risk and eliminates a source of uncertainty over debt servicing cost of a loan for the overseas buyer/borrower
- the bank in the buyer’s country receives a guarantee from us for full repayment of the loan plus interest
The following criteria must be met:
- the exporter must be carrying on business in the UK
- the contract value must be at least the equivalent of £5 million in an acceptable local currency
- there must be an acceptable financial institution to act as the loan funder/arranger/agent
The maximum amount of the loan is 85% of the contract value. A minimum of 15% of the contract value must be paid directly to the exporter by the buyer before the loan starts to be repaid. Of the 15%, a down payment of at least 5% should be received upon contract signature.
We can consider support for foreign content (that is, the cost to the exporter of purchasing goods or services from sub-contractors outside the UK) of up to 80% of the export contract’s value.
The period for repayment of the loan must be at least 2 years.
There is no fee for the application. Premium will be paid by the borrower through the loan agreement. The amount is determined on a case by case basis.
The following currencies are approved for local currency financing:
- Australian Dollar
- Bahraini Dinar
- Botswana Pula
- Brazilian Real
- Canadian Dollar
- Chilean Peso
- Czech Koruna
- Danish Krone
- Egyptian Pound
- Hong Kong Dollar
- Hungarian Forint
- Icelandic Krona
- Indian Rupee
- Indonesian Rupiah
- Israeli new Shekel
- Kenyan Shilling
- Kuwaiti Dinar
- Malaysian Ringgit
- Mauritian Rupee
- Mexican Peso
- New Zealand Dollar
- Norwegian Krone
- Offshore Chinese Yuan
- Omani Rial
- Peruvian Sol
- Polish Zloty
- Qatari Riyal
- Romanian Leu
- Russian Ruble
- Saudi Riyal
- Singapore Dollar
- South African Rand
- South Korean Won
- Swedish Krona
- Swiss Franc
- Thai Baht
- Turkish Lira
- UAE Dirham
- Ugandan Shilling
- Uruguayan Peso
- Zambian Kwacha
We are willing to consider other currencies subject to satisfying eligibility standards.
For enquiries relating to currencies not listed above please contact email@example.com.
The above information is not intended to be a comprehensive description of Local Currency Financing and many details which are relevant to particular circumstances may have been omitted.
When considering applications, underwriters will look at each case on its merits.
This guide was last updated in November 2016.