An analysis of local firms' credit management practices in foreign markets

Abstract

One of the main points on the agenda of governments of late has been the promotion of exports. This in itself is very helpful to an economy like the Maltese one, but we have to be aware that a sale in itself does not make businesses better off, it is the payment for the sale that does. The aim of this dissertation is to analyse what credit management practices are used by the Maltese exporter, before the sale transaction, to make sure that he will be paid. This implies assessing the risks associated with both the customer and the country from where the customer originates. One way to make sure the buyer will pay is by demanding cash in advance or other "safe" facilities offered by the banking system. Unfortunately, buyers are not very keen on accepting these payment methods. For this reason the payment methods demanded by the Maltese exporters will also by analysed. The analyses revealed that the Maltese exporter was conscious of customer risk but not fully aware of country risk. Moreover, by being very risk averse to the methods of payment selected, they are probably losing business.