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Country Commercial Guides for FY 2000:
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CHAPTER VIII: Trade and Project Financing
A. Brief Description of Banking System
Poland's banking system continues to adapt and modernize. With the gradual installation of new telecommunications and the advent of increased competition between domestic and foreign banks, services are becoming increasingly more user friendly and efficient.
Although the availability of banking services varies from one bank to another, commercial banks generally offer a variety of money transfer and cash management services, but they do not usually provide access to cheap credit or extensive personal banking services. Banks set their own interest rates based on several factors, particularly the inflation rate, reserve requirements, and the National Bank of Poland (NBP) rates. In mid-1999, commercial lending rates were between 17 and 26%, with inflation running at 6.5% per annum. Special services such as cash management, counseling, and risk management for foreign currency transactions vary the most.
The process of privatization in the banking sector is ongoing. A number of large banks have shares listed on the Warsaw Stock Exchange, and more are planned for the future. By the end of 1999, the majority of the Polish banking sector's assets, deposits, and equity is expected to be in the hands of the private sector. The State Treasury owns three of the largest commercial banks, though it has announced plans to sell two of them in 1999. Poland has committed itself to open its market wider by allowing banks from countries in the Organization for Cooperation and Economic Development (OECD) to establish banks or branches in Poland.
Foreign companies do not have special restrictions on access to local finance as long as funds are used for activities in Poland. Obtaining a loan can be easier if the project is export oriented. Banks usually request proof of solvency and a business plan, as well as security. Security often takes the form of a large deposit (equal to the amount of the loan plus interest) earning a relatively low rate of interest. As property values in Poland are difficult to determine, banks often require property pledged as security to be worth two to three times the value of the loan. Loans are also available to smaller businesses that can produce credible offshore guarantees.
A growing number of foreign banks are establishing banking operations in Poland, either through local subsidiaries, fully operating branches, or participation in consortium banks, which may also include Polish bank shareholders. Several U.S. banks have offices in Poland. While some banks have branches all over Poland, many are regional or have few branches. Businesses with banking needs in varying areas should carefully consider the location of their bank and availability of branches.
The zloty is, for most purposes, fully convertible. Companies operating in Poland have free access to foreign currency to finance imports, but they must exchange their hard currency export earnings, which are held in zloty accounts. Though still much opposed by foreign business, the system itself has not proven problematic (owing to the stability of the zloty). There have been no failures of the banking system to provide hard currency on demand. Profits can be repatriated by law, including repatriation through bonds and securities.
Polish companies may utilize zloty earnings to buy foreign currency to pay for imports. This helps to open the market for western goods. Transfers of hard currency abroad, other than as payments for trade transactions, are controlled.
The banking system is supervised by the central bank, the National Bank of Poland (NBP). NBP is responsible for the issue of money and control of the monetary and credit policy in Poland. It grants banking licenses and foreign exchange permits. Today there are 83 banks in Poland that are privately owned or operate as commercial companies. In addition, there are 1,295 independent cooperative banks. As of mid-1998, 26 foreign banks operate in Poland. U.S. banks and branches include American Bank in Poland (AmerBank, in which Bankers Trust is a shareholder), Citibank, Bank of America, American Express (which operates a full travel related services office in Warsaw), GE Capital, Ford, and General Motors. Fifteen Polish banks have been approved by the Ex-Im Bank for bank guarantees and currently engage in foreign trade financing.
It sometimes can take two to four weeks to collect money on a sale within Poland, so cash management services can make a significant difference in business profitability.
Business counseling ranks high among the features of some foreign banks in Poland, and most encourage their clients to call before investing. These banks offer counseling services to western firms on regulations and business practices in Poland, and some spend considerable time counseling Polish businesses on western business practices, business plans, and financial plans.
B. Foreign Exchange Controls Affecting Trading
Since the beginning of 1996, domestic business entities have not been required to resell foreign currency payments from abroad to a foreign exchange bank. Instead, they may have a Polish bank account denominated in the foreign currency and keep these payments in that account. However, if a Polish business entity does want to resell a foreign means of payment received from abroad, it can do so only to an authorized foreign exchange bank (i.e. the banks indicated by the President of NBP). When these businesses need foreign exchange, the invoice for goods to be purchased must be presented to prove the currency is needed. Most banks insist that there is no problem acquiring foreign currency. Several banks guarantee wire transfers within 48 hours, although the general rule is that foreign banks are faster than domestic ones. A transfer can be as quick as one day if it is between affiliated banks or banks on the SWIFT system and if the order is placed early in the day. It is best to have a contact at the bank monitor the transaction.
C. General Financing Availability
All commercial banks in Poland offer funds transfers and investment or working capital loans. Banks are limited by law in their exposure to any one creditor. Due to these capitalization requirements, large loans must sometimes be shared between two or more banks. The National Bank of Poland (NBP) influences interest rates for deposits or loans via the interbank offer rate. Banks charge rates of interest based on the NBP lombard rate plus bank surcharges and front-end fees.
D. How to Finance Exports/Methods of Payment
Import financing procedures in Poland adhere to western business practice. All payments go through qualified foreign exchange banks. The safest method of receiving payment for a U.S. export is through an irrevocable letter of credit (L/C). However, most banks in Poland require the importer to deposit funds prior to issuance of a letter of credit. So, for most Polish importers, the L/C is not a financing tool but a payment mechanism.
Difficulties in obtaining U.S. bank guarantees on Polish letters of credit seem to stem from considerations of Poland's overall debt performance. They do not necessarily reflect the actual performance of Polish banks on L/Cs, which is generally considered excellent. Typically, letters of credit are opened for a period to cover production and shipping, and they are normally paid within seven working days of receipt of the goods. Cash payment or down payments provide an extra measure of security for export sales.
Polish companies sometimes offer to pay for U.S. exports cash-in-advance, as it can be difficult for them to get Polish bank guarantees. U.S. exporters who request cash-in-advance payments (usually through money orders or certified bank drafts) need to be aware that many Polish companies are strapped for cash and may need time to organize their funds. Their delays are not a result of lack of interest, but more often a result of the need for time to arrange financing or loans. Finally, cash payments often arrive in the U.S. in installments and not as a single payment.
E. Types of Export Financing and Insurance Available
Sources of financing for projects in Poland vary depending upon specific financial requirements and needs. Financing is found under special programs such as those of the World Bank, the International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD), and other financial assistance programs created by western governments. In addition to local financing through Polish banks, self-financing, and financing through U.S. sources, the following organizations provide financing and/or insurance for investments made in Poland.
(1) Export-Import Bank of the United States (Ex-Im Bank)
The Ex-Im Bank provides guarantees of working capital loans for U.S. exporters, guarantees the repayment of loans, and makes loans to Polish purchasers of U.S. goods and services. The Ex-Im Bank also provides credit insurance that assists U.S. exporters shipping on short and medium term credits by insuring against nonpayment by foreign buyers. Working Capital Guarantees cover 90% of the principal and interest on commercial loans to creditworthy, small and medium sized companies that need funds to buy or produce U.S. goods or services for export. Export Credit Insurance policies protect against both the political and commercial risks of a foreign buyer defaulting on payment. There are no discretionary credit limits for short-term comprehensive credit insurance. Coverage is generally limited to irrevocable letters of credit issued or guaranteed by one of the eight banks that Ex-Im recognizes as having an international reputation for creditworthiness. Other transactions are examined on a case-by-case basis. In addition, Ex-Im Bank offers direct loans, which provide foreign buyers with competitive, fixed-rate financing for their purchases from the United States. For additional information on these programs contact CS Warsaw at Warsaw.Office.Box@mail.doc.gov.
Ex-Im Bank 811 Vermont Ave., N.W. Washington, D.C. 20571 Tel: 1-800-565-EXIM, 202-565-3946, Fax: 202-565-3380 Website: http://www.exim.gov(2) Polish-American Enterprise Fund
The Polish-American Enterprise Fund (PAEF) was established by the U.S. Congress in 1989 to promote the development of the Polish private sector through investment in small and medium-sized companies. PAEF has received a total of $240 million from the U.S. government. The Fund provides loans, grants, equity investments, feasibility studies, technical assistance, insurance, and guarantees to a variety of Polish businesses, agriculture concerns, and U.S.-Polish joint ventures. PAEF is the most profitable of the 11 enterprise funds set up by the U.S. government in Central and Eastern Europe after the collapse of communism, with total assets growing to about $270 million over the 10 past years. As of May 1997 PAEF has provided financing for more than 50 major investments with a minimum investment of USD 1,000,000. In May 1999, the U.S. government requested that nearly half of PAEF's assets be returned to the U.S. State treasury. The U.S. administration's notification asks for $120 million to be given to the U.S. treasury over a three-year period, while the remaining $150 million is to be used to establish a philanthropic fund in Poland. For more information, please contact:
Enterprise Investors 375 Park Avenue, Suite 1902 New York, NY 10152 Tel: 212-339-8330 Fax: 212-339-8359 or Polish-American Enterprise Fund Al. Jana Pawla II 25 Warsaw, Poland Tel: (48-22) 653-4500 Fax: (48-22) 653-4555 Contact person: Mr. Robert Faris, President and CEOThe Polish American Enterprise Fund through Fundusz Mikro Sp. z o.o. has successfully operated a microcredit program since 1994, giving loans of 5,000 USD to 30,000 USD. Microcredit programs, which offer loans to small businesses, are an attractive alternative to commercial banks., According to the President & CEO of the PAEF, Fundusz Micro will continue its operation for at least two to four years.
For more information, please contact:
Fundusz Mikro Sp. z o.o. ul. Zurawia 22 00-515 Warsaw Tel: (48-22) 629-00-92 Fax: (48-22) 628-88-11(3) Enterprise Credit Corporation/First Polish-American Bank S.A.
The Polish-American Enterprise Fund through the Enterprise Credit Corporation (ECC) launched a Small Business Loan program, which since 1995 has been administered by the First Polish-American Bank S.A. In the period between 1991 and April 1997, the ECC has provided more than 5,992 small loans to Polish companies totaling USD 211.3 million. The loans have been used to finance everything from imports or U.S. exports of equipment and technology, to factory upgrades and modernization, to co-financing of entrepreneurs who are starting new businesses. There is no minimum loan limit, but maximum loans are USD 250 thousand and the loan term is 3 years. In justified cases 5 year loan repayment terms may be granted. Loans have a variable rate plus margin. U.S. companies seeking to assist their Polish partners in securing low-interest rate financing for imports of their equipment should contact:
The First Polish-American Bank S.A. ul. K. Kordylewskiego 11 Krakow, Poland Tel: (48-12) 13-66-66 Fax: (48-12) 12-46-71(4) USDA Export Credit Guarantee Programs
USDA has three credit guarantee programs to support exports of U.S. food and agricultural products to Poland. The Supplier Credit Guarantee Program (SCGP) is available for Poland for the first time in Fiscal Year 1998. Under the SCGP, USDA guarantees up to 50% of the principal offered on credit terms of 15, 20, 30, 45, 60, 90, 120, 150, and 180 days. SCGP has a limit of USD 10 million for Poland and does not require a letter of credit.
USDA guarantees payment of letters of credit issued by Polish banks in favor of U.S. exporters under the GSM-102 and GSM-103 program. GSM-102 export credit guarantees of USD 25 million for 90 days to three years through approved banks are available for Poland. GSM-103 export credit guarantees of up to USD 5 million on credit terms in excess of three years, but not more than five years, are also available for exports of U.S. breeding livestock. Further information on these programs can be obtained from:
U.S. Department of Agriculture Foreign Agricultural Service Tel: (202) 720-7115Or by checking news releases for these programs on the Foreign Agricultural Service homepage:
www.fas.usda.gov/scriptsw/PressRelease/pressrel_frm.idc
(5) Commercial Bank Financing
Until very recently commercial bank financing for U.S. exports to Poland was limited due to Poland's poor credit rating. Since the signing of the London and Paris agreements, however, more banks have been willing to offer financing for U.S. exports to Poland.
F. Project Financing Available, Including Lending from Multilateral Institutions and Types of Projects Supported
(1) The World Bank
The World Bank serves as a source of loans for economic development and reform programs in Poland. The World Bank finances projects in six main areas: support of Government efforts in the energy sector, improvement of municipal and basic infrastructure, development of key Polish institutions and systems to support a market oriented economy, and development of the social and financial sectors.
The World Bank uses guarantees to support and attract private investment for projects that demand large sums of long term financing, or are in areas of high political risk. Guarantees are used to stimulate investment, and the World Bank only provides partial guarantees, sharing the risk with private lenders. The World Bank utilizes two types of guarantees in addition to the possibility of issuing a World Bank loan. A Contractual Compliance Guarantee protects private lenders against specific risks identified by the host Government, the private party, and the World Bank. A Partial Credit Guarantee protects private lenders against possible late loan payments and finances extensions of medium term loans.
A summary of projects and procurement financed by the World Bank is printed in a bi-monthly publication available by contacting:
Development Business UN Department of Public Information PO Box 5850 Grand Central Station New York, NY 10163-5850 Tel: 212-963-1515 Fax: 212-963-1381Further information on World Bank programs can be obtained from:
Public Information Center World Bank Headquarters 1818 H Street, N.W., Room GB 1-300 Washington, D.C. 20043 Tel: 202-477-1234 or World Bank Resident Mission Intraco I Building, 17th Floor 2 Stawki Street Warsaw, Poland Tel: 48-22-635-0553 Fax: 48-22-635-9857(2) International Finance Corporation (IFC)
The IFC is a member of the World Bank Group which provides non-government guaranteed direct investment in private businesses. Its purpose is to attract foreign and host country investors to supply additional debt and equity financing. IFC has been active in Poland since 1987. IFC investment will continue at the same level as last year. To date, IFC has invested over USD 505 million in 26 projects in various sectors. For additional information, please contact:
International Finance Corporation Resident Mission ul. Emilii Plater 28 Warsaw, Poland Tel: 48-22-630-3444 Fax: 48-22-630-3445(3) U.S. Trade and Development Agency (TDA)
TDA promotes U.S. exports through direct assistance to middle-income countries, including Poland. TDA accomplishes this by financing feasibility studies and related planning services and training programs. These projects must, as a rule, offer good opportunities for U.S. export of equipment and services. TDA has feasibility study financing available to the public and private sectors. The public sector program comprises more than 90% of TDA financing. It offers grants to foreign governments for feasibility studies to be performed by U.S. firms in large-scale public sector projects. The private sector program offers cost-sharing of feasibility studies with U.S. investors on a reimbursable basis. TDA has provided more than USD 10 million in feasibility grants to Poland over the last four years. For further information contact:
U.S. Trade and Development Agency, Washington, D.C. 20523-1602 Tel: 703-875-4818 Fax: 703-875-4009(4) European Bank for Reconstruction and Development
The European Bank for Reconstruction and Development (EBRD) operates as both a development bank and merchant bank, providing government guarantees and commercial loans. The EBRD lends and invests exclusively in projects in Central and Eastern Europe, and at least 60% of its funding is targeted to private sector companies or state-owned companies going through the privatization process. As of January 1997, the EBRD had approved funding for 61 projects for a total investment of ECU 4,129.9 million. With an emphasis on the environment, the EBRD requires proposals that demonstrate good products or services with sound market prospects, significant capital commitments by project sponsors, dependable technology, sound environmental management, a high return on investment, and overall financial viability of the borrowing enterprise. For further information, please contact:
European Bank for Reconstruction and Development U.S. Office London, England Tel: 44-71-338-6569 Fax: 44-71-338-6487 Polish Office Lim Centre Al. Jerozolimskie 65/79 Warsaw, Poland Tel: 48-22-630-7275 Fax: 48-22-630-6551(5) Overseas Private Investment Corporation (OPIC)
OPIC is a self-sustaining U.S. government agency that provides investment information, financing, and political risk insurance for U.S. companies investing in emerging markets like Poland. OPIC offers medium to long term financing in Poland through its direct loans and guarantees program. Direct loans are reserved for U.S. small business or cooperatives and generally range in amounts from USD 2-10 million. Loan guarantees are issued to U.S. lending institutions and range in size from USD 10-75 million, and in certain instances to USD 200 million. OPIC can insure U.S. investments against political violence, expropriation, and inconvertibility of local currency.
OPIC has initiated a USD 65 million fund called Poland Partners. The fund is designed to provide capital for new projects, expansion of existing enterprises, and privatization of state-owned businesses. Poland Partners will focus on seven high growth sectors: 1. pharmaceutical and personal care products; 2. automotive after-market; 3. building supplies and home improvements; 4. financial services; 5. franchised services; 6. plastic molding; and 7. food processing. OPIC also has developed an environmental fund to provide capital to U.S. companies involved in projects linked to economic development and the protection of the environment in Poland and other countries in Central and Eastern Europe. For projects involving warehousing, industrial sites, and distribution, OPIC has established a real estate fund. For more information, please contact:
Overseas Private Investment Corporation 1100 New York Avenue, N.W. Washington, DC 20527 Tel: (202) 336-8799 Fax: (202) 408-9859 OPIC FACTS LINE: 202-336-8700G. List of Banks with Correspondent U.S. Banking Arrangements
Bank Przemyslowo Handlowy S.A. (BPH) ul. Na Zjezdzie 11 30-527 Krakow, skr. poczt. 57 Tel: (48-12) 618-7888, 618-7845 Fax: (48-12) 618-7843 Pomorski Bank Kredytowy S.A. (PBKS) Pl. Zolnierza Polskiego 16 70-551 Szczecin Tel: (48-91) 440-0100 Fax: (48-91) 433-3114 Powszechny Bank Gospodarczy S.A. Al. J. Pilsudskiego 12, skr. Poczt.12 90-950 Lodz Tel:(48-42) 636-6244 Fax:(48-42) 636-7772 Bank Polska Kasa Opieki, S.A. (PBKO) (Pekao, SA) ul. Grzybowska 53/57 00-950 Warsaw Tel:(48-22) 656-0780, 656-0781 Fax:(48-22) 656-0453 Bank Zachodni S.A. (BZ) Rynek 9/11, skr. poczt. 1109 50-950 Wroclaw Tel: (48-71) 44-5411, 72-3138 Fax: (49-71) 343-2883, 72-3138 Gornoslaski Bank Gospodarczy S.A. (BGBK) Bank Slaski SA ul. Warszawska 6, skr. poczt. 1138 40-006 Katowice Tel: (48-32) 200-8500 Fax: (48-32) 58-6497 Bank Inicjatyw Gospodarczych BIG S.A. (BIG) ul. Kopernika 36/40, skr. poczt. 6 00-924 Warsaw Tel: (48-22) 657-5050, 657-5000 Fax: (48-22) 626-7180, 657-5009 Bank Handlowy w Warszawie S.A. (BH) (Commercial Bank SA) ul. Koszykowa 54 00-950 Warsaw Tel:(48-22)630-8625 Fax:(48-22)630-8609 Bank Rozwoju Eksportu, S.A. (BRE) (Export Development Bank SA) Plac Bankowy 2, skr. poczt. 728 00-950 Warsaw Tel:(48-22)637-2800 Fax:(48-22)637-1879 Powszechna Kasa Oszczednosci Bank Panstwowy (PKO BP) ul. Nowy Swiat 6/12, skr. poczt. 639 00-950 Warsaw Tel:(48-22)637-1618 Fax:(48-22)635-5855 Bank Gospodarki Zywnosciowej S.A. (BGZ) (Bank for the Food Economy) ul. Kasprzaka 10/16 01-215 Warsaw Tel:(48-22) 860-4000 Fax:(48-22) 860-5045 Bank Depozytowo-Kredytowy S.A. (BDK) ul. Wieniawska 12 20-071 Lublin Tel:(48-81)532-0171 Fax:(48-81)534-3271 Bank Gospodarstwa Krajowego (BGK) ul. Swietokrzyska 12, skr. poczt. 57 00-916 Warsaw Tel: (48-22) 826-23-51, 20-03-11 Fax: (48-22) 20-07-30 Narodowy Bank Polski (NBP) ul. Swietokrzyska 11/21, skr. poczt. 1011 00-919 Warsaw Tel: (48-22) 653-2335, 653-2571 Fax: (48-22) 653-1321
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
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