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Dr AbdelGadir Warsama Ghalib, a corporate legal counsel, wrote in Gulf Times that forfaiting originated in Europe in the middle of the last century and has since spread worldwide to support trade finance and improve relations between exporters and importers. The expert referenced the ICC Rules for Forfaiting, or URF 800, which establish uniform standards for the global forfaiting market and received endorsement from the United Nations Commission on International Trade Law. This development reflects the International Chamber of Commerce’s broader efforts to facilitate international trade through a suite of rules including UCP 600 and URDG 758.
Forfaiting allows exporters to receive immediate cash by selling medium and long-term foreign accounts receivable at a discount on a without recourse basis, Ghalib explained in the article. Banks or finance companies purchase these receivables and accept the risk of non-payment once the exporter has delivered the goods according to the contract. Among its advantages are the complete elimination of risks for the exporter along with full financing of the contract value, permitting offers of extended payment terms in markets with elevated credit risks.
The mechanism typically involves bills of exchange, promissory notes or letters of credit, where the buyer provides a bank guarantee or LC to enable financing on a single transaction basis at fixed or variable rates, according to the counsel. After the forfaiter agrees to the deal and determines the discount rate, the exporter can add this cost to the sale price, sign the contract and arrange for any required importer bank guarantee. Upon shipment and document submission, the forfaiter pays the agreed amount and takes over all future collection responsibilities from the importer, leaving the exporter free of further financial exposure.
Costs to the exporter consist of the discount rate tied to the receivable period plus a risk margin, with certain additional charges typically borne by the importer, Ghalib stated. The applicable risk and resulting margin depend on factors including the importing country’s stability, the loan’s length, the deal’s currency and the repayment terms. Forfaiting frequently offers better value than standard trade finance products thanks to its risk transfer and liquidity benefits, leading the author to observe that forfaiting is taking shape as a lucrative option for interested parties.
An International Chamber of Commerce assessment found that adoption of URF 800 has helped standardize and grow forfaiting activity, particularly in regions with expanding cross-border trade. The Asian Development Bank has estimated the global trade finance gap at approximately 1.7 trillion dollars, a shortfall that alternative tools like forfaiting can help address in part by unlocking capital for exporters. In the GCC, where non-oil trade has grown steadily, such mechanisms support economic diversification efforts by mitigating risks in dealings with diverse international partners.
Data from the World Trade Organization indicates that global merchandise trade volumes increased by 2.7 percent in 2025 despite geopolitical tensions, underscoring the need for reliable financing options like forfaiting to sustain momentum. Ghalib emphasised the importance of understanding these variables when structuring transactions to ensure cost effectiveness. The counsel recommended forfaiting as a practical solution for businesses aiming to expand their international footprint without shouldering prolonged credit exposures.
