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Bank guarantees

A bank guarantee is an irrevocable commitment undertaken by a bank (guarantor) in favor of a party, referred to as beneficiary, to pay to it an amount of money, should another party, referred to as applicant, upon the request of which the bank guarantee is issued, fail to meet certain liabilities towards the beneficiary, assumed under a commercial or other kind of contract (object of the guarantee). 
Moldova Agroindbank issues guarantees in MDL and foreign currency, local (the beneficiary and the debtor are residents) and international (the beneficiary and/or the applicant are non-residents).  
The main kinds of guarantees issued by the bank are as follows:
  • Payment Guarantee is issued to coverthe debtor’s obligations to pay a certain amount of money under a commercial contract;
  • Bid Bond which ensures that the seller shall not withdraw its bid after the buyer accepts the bid’s conditions. It allows the seller to avoid spending cash and time to call for new bids and examine them;
  • Performance Bond ensures the fulfillment of contractual obligations in line with the contract’s conditions and terms;
  • Advance payment guarantee warrants that the amount paid in advance by the buyer will be paid back if the seller fails to meet contractual obligations;
  • Customs guarantee is issued in favor of the Customs Department. The list of commodities for which the deadline for the payment of the VAT on import may be extended is set by the law on state budget;
  • Credit guarantee warrants the debtor’s payment obligations towards its creditor provided for in a loan agreement;
  • Guarantee/counter guaranteeMoldova Agroindbank may step in as intermediary, should the beneficiary demand that a guarantee be issued by a foreign first rank bank. In this case, Moldova Agroindbank issues a counter guarantee in favor of that bank.  

Advantages for customers:

  • Possibility to postpone payments under contractual obligations and/or the possibility to finance production without using their own working capital;
  • Proves the debtor’s capacity to meet his/her contractual obligations as the bank issues guarantees on condition that it will check the debtor’s solvency;
  • Possibility to bid without withdrawing their own capital from circulation;
  • Lower costs than the ones for a bank credit.

Letters of credit

Letters of credit (L/C) are a strong written commitment taken by the bank at the request of the importer (debtor) to pay the exporter (beneficiary) for the goods exported or services provided against the delivery within a fixed term of documents proving that the goods were delivered or that the service was provided.
The bank issues a letter of credit only if:

  • The conditions of the letter of credit match the conditions of the import comercial  contract;
  • The commercial transaction is in accordance with the provisions of the currency legislation;
  • The risk of debtor’s payment obligation is covered (cash collateral deposit, credit line, etc.).

Advantages for customers:

  • Customers do not freeze (withdraw from circulation) their monetary means throughout the term of the letter of credit (should it be an uncovered letter of credit);
  • Importers pay less for the bank obligation than for a regular loan, from the moment the letter of credit is issued and until payment. If at the moment of payment, the customer has enough funds to pay, the loan may not be necessary;
  • There is certainty that exporters, having the payment guarantee of the issuing bank (at will, the confirmation of a first rank bank as well), will deliver commodities in line with the terms and conditions provided for in the agreement;
  • The bank will make no payment if the exporter fails to deliver commodities in accordance with the conditions set out in the text of L/C.

Depending on the kind of letter of credit, the bank may issue,  advice and/or confirm letters of credit, transfer  letters of credit in favor of other beneficiaries. 
Documentary collections (D/C)

Documentary collection is an arrangement by wich  a bank (remitting bank) acts in accordance with instructions given by customer (issuer) in order to obtain  payment or the acceptance of financial documents or to deliver documents against payment or against the acceptance of financial documents.

There are two types of D/C-related documents:

  • Financial documents: bills of exchange, promissory notes, cheques or other similar instruments used to obtain financial means;
  • Commercial documents: invoices, waybills, property documents or other similar documents other than financial documents.

The operation resides in transmitting the commercial and financial documents from the payment beneficiary to the payer against payment, acceptance or other conditions.


  • Documentary collection gives partners a certain degree of certainty that contractual obligations will be met. 
  • After seeing the document before paying, the buyer is sure that the payment will be made only after the exporter fulfilled its obligations and exported the commodity.
  • The seller is certain that the documents will not be provided to the importer to get the commodity until their counter value is paid.