Discusses the most common methods of payment, such as open account, letter of credit, cash in advance, documentary collections, factoring, etc. Includes credit-rating and collection agencies in this country. Includes primary credit or charge cards used in this country.
Last Published: 7/11/2019
Importers and exporters can comfortably choose from a wide range of payment methods. Below are some of the most common payment methods:
  • Letters of Credit (LCs) also known as Commercial or Documentary Credits.  The letter of credit allows the buyer and seller to contract a trusted intermediary, in this case a bank, that will guarantee full payment to the seller provided the seller has shipped the goods and complied with the terms of the agreed-upon letter.  The LC serves to evenly distribute risk between buyer and seller since the seller is assured of payment when the conditions of the LC are met and the buyer is reasonably assured of receiving the goods ordered.  This is a common form of payment, especially when the contracting parties are unfamiliar with each other.  LCs are irrevocable, which means that once the LC is established it cannot be changed without the consent of both parties.  At least four parties are involved in any transaction using an LC: Buyer or applicant, Issuing bank or Applicant’s bank, Beneficiary’s bank or receiving bank and Seller or beneficiary.
  • Money transfer agents: Exporters and their clients can send money internationally, process money orders, bill payments, and prepaid services through international money agents.  Agents such as Western Union and MoneyGram offer these services in Rwanda and partner with several banks including Bank of Kigali, Banque Populaire du Rwanda (BPR)/Atlas Mara, Kenya Commercial Bank, and Ecobank.
  • Documentary Collection: To collect payment from a foreign buyer using documentary collection, the seller sends a draft or other demand for payment with the related shipping documents through bank channels to the buyer’s bank.  The bank releases the documents to the buyer upon receipt of payment or promise of payment.  It is generally safer for exporters to require that bills of lading be "made out to shipper’s order and endorsed in blank" to allow them and the banks more flexible control of the merchandise.  Documentary collections are only viable for ocean shipments.
  • Drafts (bill of exchange): A draft (sometimes called a bill of exchange) is a written order by one party directing a second party to pay a third party.  Drafts are negotiable instruments that facilitate international payments through respected intermediaries such as banks but do not involve the intermediaries in guaranteeing performance. Such drafts offer more flexibility than LCs and are transferable from one party to another.  There are two basic types of drafts: sight drafts and time drafts.
  • Open Account:  Open account means that payment is left open until an agreed-upon future date. It is one of the most common methods of payment in international trade.  Payment is usually made by wire transfer or check.Cash in Advance: Cash in advance is risk-free except for consequences associated with the potential non-delivery of the goods by the seller. Cash in advance is usually a wire transfer or a check.  Although an international wire transfer is more costly, it is often preferred because it is speedy and does not bear the danger of the check not being honored. For wire transfers the seller must provide clear routing instructions in writing to the buyer or the buyer’s agent. These include: The full name, address, telephone, and telex of the seller’s bank, the seller’s full name, address, telephone, type of bank account, and account number.For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide available at http://www.Export.gov/TradeFinanceGuide  
  • In February 2019, Standard and Poor’s affirmed Rwanda’s ‘B/B-” long and short-term foreign and sovereign credit ratings.  Fitch's credit rating for Rwanda was last reported at B+ with stable outlook.  In general, a credit rating is used by potential creditors and investors to gauge the credit worthiness of Rwanda or any country, thus potentially having an impact on the country's borrowing costs.
  • Credit Card: Some banks now offer buyers special lines of credit that are accessible via credit card to facilitate (even substantial) purchases.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.