Kenya - Methods of Payment Kenya - Methods of Payment
Business practices for export financing vary from country to country. Prior to exporting, U.S. firms are strongly advised to discuss best practices and transaction details with an experienced international bank familiar with Kenya. U.S. firms are also strongly advised to determine the range of financing offered by competitors.
There are several basic methods of receiving payment for products sold in Kenya, the selection of which is usually determined by the degree of trust in the buyer's ability to pay. Payment alternatives that U.S. exporters might consider, in order of the most secure to the least-secure include:
- Cash in advance (confirmed wire transfer or check after depositing and clearing);
- Confirmed irrevocable letter of credit (if concerned about the importer and international standing of his/her bank);
- Irrevocable letter of credit (if concerned only about the reliability of the importer);
- Documentary drafts for collection (checks drawn on the importer's bank);
- Open account; and
- Consignment sales
As a general rule, U.S. exporters selling to Kenya for the first time are advised to transact business only on the basis of cash-in-advance or an irrevocable letter of credit confirmed by a recognized international bank. Any other form of payment carries a high level of risk. The establishment of the African Trade Insurance Agency (ATI) in 2001 strengthened and increased foreign trade by providing cover against non-commercial risks such as war, trade embargoes, expropriation, and seizure of goods. ATI has support from the International Development Association – an arm of World Bank – and offers insurance at lower costs than most private, commercial insurers. Since 2003 ATI has supported over $ 13 billion worth of trade and investments across the continent, secured an investment grade rating of 'A' from Standard & Poor's, and expanded membership to more than a dozen African countries. With Standard & Poor’s “A/Stable” credit rating, U.S. exporters can take cover from ATI for their sales to Kenyan and other African countries.
The Commercial Service section at the U.S. Embassy in Nairobi can provide background and credit-risk information on Kenyan individual or firm. The section can also recommend local companies that provide U.S. exporters with credit information and the bona fides of potential Kenyan importers on a commercial basis.