Which term denotes a payment instrument used in international trade that allows credit to the importer?

Which term denotes a payment instrument used in international trade that allows credit to the importer?

• A. Bills of Exchange
• B. Telebanking
• C. M-Money
• D. Capital

Answer: (A)

In international trade, a bill of exchange functions as a formal payment instrument that can extend credit to the importer. It is a written order from the exporter directing the importer to pay a specified amount either on demand or at a future date. When the importer accepts the bill, a formal obligation to pay is created, allowing the importer to receive the goods now and pay later. Banks can also discount or finance the bill, providing immediate funds to the exporter while the importer still benefits from the agreed credit terms. This combination of a guaranteed future payment and potential financing is what makes the bill of exchange the instrument that enables credit for the importer. Telebanking, mobile money, and general capital are not specific trade instruments offering this structured credit arrangement in cross-border transactions.

In international trade, a bill of exchange functions as a formal payment instrument that can extend credit to the importer. It is a written order from the exporter directing the importer to pay a specified amount either on demand or at a future date. When the importer accepts the bill, a formal obligation to pay is created, allowing the importer to receive the goods now and pay later. Banks can also discount or finance the bill, providing immediate funds to the exporter while the importer still benefits from the agreed credit terms. This combination of a guaranteed future payment and potential financing is what makes the bill of exchange the instrument that enables credit for the importer. Telebanking, mobile money, and general capital are not specific trade instruments offering this structured credit arrangement in cross-border transactions.