The effectiveness of documentary credits as a driver of international trade and trade finance in Zimbabwe

Abstract

This dissertation seek to ascertain the effectiveness of documentary credits as a driver of international trade and trade finance in Zimbabwe a developing economy. Trade finance enables economic players to have capacity to participate in international trade of import and export allowing Zimbabwe to benefit from globalization. The aim of the study was to ascertain the Effectiveness of Documentary Credits as a driver of International Trade and Trade Finance in Zimbabwe.To achieve the research aim the following were the following objectives, to establish the effectiveness of documentary credits in mitigating credit risk in Zimbabwe, to ascertain the effectiveness of documentary credits in mitigating performance risk, to investigate the effectiveness of documentary credits in preventing externalization of foreign currency, to establish the relationship between documentary credits and growth of exports and establishing whether the Zimbabwe`s financial institutions had access to adequate lines of credit for the use of documentary credits The study adopted a purely quantitative survey method in managing and analysing the data. The method enabled the researcher to test the significance of the variables which were found to be related. The positive, strong and statistically significant relationship between Export Growth and Mitigating Credit Risk, between Export Growth and Mitigating Credit Risk and Export Growth and Externalisation Mitigation led to the conclusion that documentary credits influence the growth of exports as a driver of international trade and trade finance. The study corroborated the findings from other researches concerning the impact and significance of the perceived mitigating impact of the letter of credit which in turn will affect the growth of exports in the country. The perceived mitigating impact of the factors to the growth of exports was confirmed