How Local Currency Financing works, its benefits, eligibility and how to apply.
With Local Currency Financing, UK Export Finance guarantees a buyer credit loan to an overseas borrower in local currency, financing the purchase of capital goods and/or services from a UK exporter. Loans can be made in one of around 40 eligible currencies, which are listed below.
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.
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 following currencies are approved for Local Currency Financing:
|China||Chinese offshore yuan|
|Czech Republic||Czech koruna|
|Hong Kong||Hong Kong dollar|
|Israel||Israeli new shekel|
|New Zealand||New Zealand dollar|
|Saudi Arabia||Saudi riyal|
|South Africa||South African rand|
|South Korea||South Korean won|
|Taiwan||New Taiwan dollar|
|Trinidad and Tobago||Trinidad and Tobago dollar|
|United Arab Emirates (UAE)||UAE dirham|
The following currencies are considered for local currency financing on a case-by-case basis:
|Dominican Republic||Dominican peso|
|Sri Lanka||Sri Lankan rupee|
We are willing to consider other currencies subject to satisfying eligibility standards.
For enquiries relating to currencies not listed above please contact firstname.lastname@example.org.
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.
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.
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 and 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 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 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.
Published: 24 November 2016
Updated: 11 January 2018
- The list of eligible currencies has been updated. This includes currencies approved for local currency financing and currencies which are considered for local currency financing on a case-by-case basis.
- Updated to add currencies - September 2017
- First published.