Project Report
Project Report
On
International Sources of Finance
Submitted to
Submitted by Supervisor
Arshdeep kaur Dr. Shelly
Roll no : 2331333
DEPARTMENT OF MANAGEMENT
GLOBAL GROUP OF INSTITUTES
AMRITSAR
[2023 – 2025]
1
Student Declaration
I Arshdeep kaur student of MBA 3rd semester declare that the project on
“ International Sources of Finance ” has been done by me under the guidance of
Dr. Shelly in partial fulfillment of MBA Program during academic year 2023 – 2025 .
All the data represented in this project is true and correct to the best of my knowledge
and belief.
I also declare that this project report is my own preparations and copied from
anywhere else.
Date :
Signature
2
Faculty Declaration
I hereby declare that the student Ms. Arshdeep kaur of MBA 3rd semester has
undergone her project report under my periodic guidance titled ‘’International
Sources of Finance’’.
Further I hereby declare that the student was periodically in touch with me during her
Project Report and the work done by student is genuine and original.
-------------------------------------------------
[Signature of Supervisor]
3
Acknowledgement
Arshdeep kaur
MBA 3rd sem
Roll no : 2331333
4
TABLE OF CONTENTS
5 Conclusion, Suggestions 41 - 43
Bibliography 44
Questionnaire 45 - 47
5
CHAPTER - 01
INTRODUCTION
6
In today’s interconnected world, money flow across borders, powers economics, businesses,
and opportunities. Whether a company in India is expanding overseas, a government funding
infrastructure, or startup securing global investments,
international financing plays a vital role in turning these ambitions into reality.
7
2. Supporting Economic Development : By allowing the movement of capital between
nations, international finance contributes to economic growth. It brings resources that
can help create jobs, introduce new technologies, and improve productivity. This
exchange often benefits both the investing and receiving economics.
3. Enhancing Economic Stability : In a connected world, financial challenges in one
country can quickly influence others. International finance helps countries collaborate
to address such challenges, contributing to address such challenges, contributing to
more excellent stability in the global financial system.
Support
Facilitati Econom
ng Global ic
Trade Develop
ment
Enhanci
ng
Managin
Econom
g Risks
ic
Stability
Open
Funding access
Infrastruc to
ture Global
projects Resourc
es
projects that require large scale investments, enabling economic growth and
development.
8
What is International Sources of Finance ?
International sources of finance refer to the funds and capital available for
businesses, governments, or individuals outside their home country’s borders. These
sources play a critical role in enabling economic growth, facilitating trade and
investment, and supporting development across nations. The primary goal is to raise
funds to support projects, investments, or operations on a global scale
* Foreign bond
market Banker's acceptance
* Foreign bank Discounting
* Euro market Factoring
* World bank EXIM Bank of India
* IMF
1. Long Term :
Long-term sources of finance refer to the funds that a business or organization secures
for an extended period, typically over one year or more, to support its long-term
objectives, operations, and growth. These sources are usually used for investments in
assets, expansion, and major capital expenditures.
9
term objectives, operations, and growth. These sources are usually used for investments
in assets, expansion, and major capital expenditures.
* Diversification: Investors can spread their risk by holding bonds from different
countries, reducing their exposure to the economic and political risks of any one nation.
* Higher Yields: Foreign bonds sometimes offer higher yields than domestic bonds,
especially if the issuer’s home country has higher interest rates.
* Eurodollar Market: A segment of the foreign bond market where bonds are issued in
U.S. dollars but outside the United States (for example, in Europe).
* Asian Bond Market: A growing market for bonds issued in Asian countries, often
denominated in local currencies or U.S. dollars.
B. Foreign Banks :
10
Foreign banks are financial institutions that operate outside their home country,
providing banking services to individuals, businesses, and governments in other
countries. These banks may establish branches, subsidiaries, or representative offices in
foreign markets or engage in cross-border activities such as lending, investing, and
providing financial services.
* Retail Banking: Offering personal banking services like savings accounts, checking
accounts, loans, and credit cards.
* Corporate Banking: Providing business services such as working capital financing, trade
finance, business loans, and cash management services.
* Wealth Management and Private Banking: Offering investment advisory services, wealth
management, and tax planning for high-net-worth individuals.
* Access to Global Market: Foreign banks provide access to global financial markets,
making it easier for businesses to engage in international trade and finance.
* Diverse Financial Products: Customers may benefit from a wide range of financial
products and services that might not be available from local banks.
11
* Regulatory and Legal Compliance: Foreign banks must navigate the complex
regulatory environments of multiple countries, which can include different laws
regarding capital requirements, lending practices, and reporting standards.
* HSBC (Headquartered in the UK) operates globally, with branches in many countries.
C. Euro Markets :
The Euro markets refer to the financial markets in which financial instruments,
particularly bonds, are issued and traded outside the jurisdiction of the domestic
financial system. The term "Euro" in this context doesn't relate specifically to the
currency, but rather to the fact that these markets are "European" in origin but function
outside traditional European borders and currency boundaries.
* Access to Global Capital: Issuers can tap into international pools of capital, gaining
access to foreign investors and enhancing liquidity.
12
* Diversification of Risk: Investors in Euro markets can diversify their portfolios by
investing in foreign assets, providing an opportunity for global exposure and risk
management.
* Lower Borrowing Costs: Companies and governments may benefit from more
favorable borrowing costs in Euro markets due to increased competition and access to
investors from around the world.
* Flexible Currency Options: The Eurobond and Eurocurrency markets allow for
financing in different currencies, which can help match the currency needs of
international businesses and governments.
* Currency Risk: In the Eurobond and Eurocurrency markets, investors are exposed to
the risk of currency fluctuations, which can affect returns.
* Regulatory Risk: Since Euro markets often operate outside national financial
regulations, there can be increased risk due to lack of oversight.
* Interest Rate Risk: Changes in global interest rates can impact the cost of borrowing
in Eurocurrency markets and affect the yield on Eurobonds.
D. World Bank :
The World Bank is an international financial institution that provides loans and grants
to the governments of low and middle-income countries for the purpose of pursuing
capital projects. It aims to reduce poverty and promote economic development by
offering financial and technical assistance to developing countries.
* Poverty Reduction: The primary goal of the World Bank is to reduce global poverty
by promoting sustainable development, helping countries improve their infrastructure,
education, healthcare, and economic policies.
13
* Economic Development: The bank supports long-term projects in infrastructure,
education, health, agriculture, and environmental sustainability to stimulate economic
growth in developing nations.
* Promoting Shared Prosperity: The World Bank strives to improve the living
conditions of people in developing countries by fostering shared prosperity and
reducing inequality.
* Health and Education: Improving access to healthcare and education to raise living
standards and increase economic productivity
E. IMF :
* Global Financial Stability: The IMF works to stabilize the global economy by
ensuring smooth and orderly functioning of international trade and financial markets.
14
* Promote Economic Growth: By offering policy advice, technical assistance, and
financial resources, the IMF helps countries achieve sustainable economic growth and
reduce poverty.
* Surveillance: The IMF monitors global economic trends and conducts surveillance of
its member countries' economies to assess potential risks and offer recommendations.
* Lending: The IMF provides short-term financial support to countries in need through
various lending programs. The primary aim is to help countries stabilize their
economies and restore growth.
* Surveillance: The IMF tracks global and national economic trends, monitors
macroeconomic and financial developments, and offers advice to help prevent crises
and improve financial stability.
* Technical Assistance: The IMF helps countries build capacity in areas such as budget
management, monetary policy, and exchange rate systems to improve governance and
economic management.
* Research and Data: The IMF collects and analyzes global economic data, providing
valuable research on topics like economic growth, inflation, fiscal policy, and
international trade.
* Conditionality and Austerity: Critics argue that the IMF’s lending programs often
come with harsh conditions, such as austerity measures, which may hurt vulnerable
populations and slow down economic recovery.
* Social and Economic Impact: Some critics argue that IMF-imposed policies can lead
to increased poverty, unemployment, and inequality, particularly in developing
countries.
15
* Influence of Major Economies: Because the IMF's decisions are influenced by the
financial contributions of its member countries, critics argue that larger economies (like
the U.S. and European countries) have disproportionate power in shaping IMF policies.
* Lack of Transparency and Accountability: The IMF has been criticized for its
decision-making process, which some see as opaque and lacking in accountability to the
public and the countries it serves.
2. Short Term :
Short-term sources of finance refer to funds that a business or organization can
access quickly and that are typically expected to be repaid within a short period, usually
within a year. These sources are crucial for managing day-to-day operations, meeting
working capital needs, or handling temporary financial gaps.
A. Banker’s Acceptance :
16
* Discounted Instrument: Similar to other financial instruments, banker’s acceptances
are usually traded at a discount to their face value. The holder receives the full face
value at maturity, and the difference between the purchase price and the maturity value
represents the interest or return.
* Reduced Risk: Since a bank guarantees payment, the risk of non-payment is lower,
which makes it an attractive financing option for both the buyer and the seller.
17
# Disadvantages of Banker's Acceptances :
* Cost: The business may need to pay fees to the bank to have the acceptance issued,
and the instrument is typically discounted, meaning the company doesn't receive the full
value upfront.
* Credit Risk: If the issuing bank has credit issues, there is still some risk involved for
the holder of the BA, as payment depends on the bank's ability to pay at maturity.
* Market Risk: The secondary market for BAs may not always offer favorable prices,
which could result in a loss for the holder if they sell the BA before it matures.
B. Discounting :
Discounting is a financial process used to determine the present value of a future cash
flow or financial instrument, by applying a discount rate. In simple terms, discounting is
the method of calculating how much a future sum of money is worth today, considering
that money available today is generally more valuable than the same amount in the
future due to the opportunity to earn returns.
# Types of Discounting :
# Advantages of Discounting :
* Helps Determine the True Value: It helps businesses, investors, and individuals
understand the true value of future cash flows or financial instruments in today's terms.
18
* Investment Decision Making: Discounting is essential for making informed
investment decisions, especially when comparing different investment opportunities
with varying time frames and returns.
* Risk Assessment: Discounting reflects the risk associated with the future value of
money. A higher discount rate often accounts for greater risk or uncertainty in future
cash flows.
# Disadvantages of Discounting :
* Choice of Discount Rate: The discount rate is a subjective measure, and small
changes in it can significantly affect the present value, leading to differing conclusions
depending on the rate used.
* Uncertainty: Discounting assumes that future cash flows can be estimated accurately,
but this is often difficult, as future events are uncertain.
C. Factoring :
* Accounts Receivable Sale: The business sells its outstanding invoices (accounts
receivable) to the factor at a discounted price.
* Immediate Cash Flow: Instead of waiting for customers to pay, the business receives
immediate cash, which helps improve its working capital and liquidity.
19
* Factor Takes Over Collection: The factor assumes responsibility for collecting
payments from the customers, reducing the administrative burden for the business.
* Discount or Fee: The factor buys the receivables at a discount, typically ranging from
1% to 5% of the invoice value, depending on the risk involved, the size of the business,
and the terms of the deal.
* Recourse Factoring: If the customers fail to pay the invoices, the business is
obligated to buy back the unpaid receivables from the factor.
# Advantages of Factoring :
* Improved Cash Flow: Businesses receive immediate cash, allowing them to cover
operational expenses, pay suppliers, and invest in growth without waiting for customer
payments.
* No Debt Incurred: Factoring is not a loan; it’s the sale of an asset (accounts
receivable). This means the business doesn’t take on additional debt or interest
payments, unlike traditional financing options.
* Outsourced Collections: The factor takes over the collection process, which can
reduce administrative burdens and the cost of chasing overdue payments.
* Flexibility: Factoring provides flexible financing, especially for small and medium-
sized businesses that might struggle to secure traditional loans or lines of credit.
* Non-Recourse Option: Non-recourse factoring allows the business to offload the risk
of customer defaults to the factor, which can be beneficial for companies that deal with
customers with uncertain creditworthiness.
# Disadvantages of Factoring :
* Cost: The factoring fee can be expensive, especially for businesses with high-risk
customers or those engaging in non-recourse factoring. The business receives less than
the full value of the invoices due to the discount or fee charged by the factor.
20
* Customer Relationship: Since the factor takes over collections, customers may be
contacted by a third party, which can affect the relationship between the business and its
customers. In some cases, customers may not appreciate dealing with a third-party
collector.
# Example :
Let’s say a business has $100,000 in receivables from customers and needs immediate
cash to pay for inventory or meet payroll. The business sells these receivables to a
factoring company at a 5% discount. The factoring company gives the business $95,000
in immediate cash, and the factoring company then collects the $100,000 from the
customers. After collecting the payment, the factor may send the remaining $5,000 to
the business, minus any additional fees.
21
helping exporters manage the working capital required for production, shipment, and
delivery of goods.
* Lines of Credit: The bank extends Lines of Credit to foreign governments, financial
institutions, and businesses to finance the export of Indian goods and services. These
credits help promote Indian exports by providing financial assistance to overseas
buyers.
* Trade Credit: EXIM Bank offers trade credit and export credit insurance to exporters
to protect against non-payment risks and encourage foreign buyers to make purchases
on credit terms.
* Export Promotion: EXIM Bank provides various programs and initiatives to promote
India's exports, such as facilitating market access, assisting with trade agreements, and
encouraging participation in international exhibitions and trade fairs.
* Financial Products: EXIM Bank offers various financial products like working
capital financing, export development funds, and trade-related financing, designed to
support exporters in all stages of their business operations.
* Overseas Investment Finance: EXIM Bank also supports Indian businesses looking
to invest in overseas markets, promoting the international expansion of Indian
enterprises. The bank offers financing for joint ventures, partnerships, and greenfield
projects abroad.
* Guarantees and Insurance: The bank provides export credit guarantees and
insurance schemes to reduce the risk of non-payment, helping exporters confidently
trade in international markets.
* Promote Indian Exports: To foster the growth and development of Indian exports,
making India more competitive in the global market.
22
* Increase Foreign Exchange Earnings: EXIM Bank’s activities contribute to
enhancing India's foreign exchange earnings through its export-oriented initiatives.
23
Vision :
Mission:
24
CHAPTER – 02
RESEARCH METHODOLOGY
25
OBJECTIVES OF THE STUDY :
Sampling Plan :
Designing a research plan involves data source, research approach, research
instruments were selected.
Sampling Size: 50 persons were visited for the purpose of the study.
Sampling Technique: In this study, the respondents are chosen through the random
Sources of Data:
Primary Data: Primary data is collected during the study with questionnaire on the
basis of which analysis, interpretation & findings of study have been concluded.
Tools of Presentation:
Findings have been shown in form of the Graphs & Charts and Tables.
26
CHAPTER – 03
DATA ANALYSIS AND
INTERPRETATION
27
1. What are international sources of finance ?
Meaning
Interpretation :
80% define the international sources of finance as financial resources obtained from
foreign international markets and the other 20% define it as only loans from
international markets.
Personal Savings 2 5%
Government 15 30 %
Bonds
Total 50 100 %
Primary Sources
FDI
Domestic bsank loans
Personal savings
Government bonds
Interpretation :
40% of government bonds are considered as a primary source of international
finance for long scale project while 30% are domestic bank loans,25% are foreign direct
investment and 5% are personal savings.
29
3. Which institution provides financial assistance to countries facing balance of
payments problems?
Institution
Interpretation :
The International Monetary Fund provides 50% financial assistance to countries facing
balance of payment ,the united nations provides 20% financial assistance and both the
world trade organization and export credit agencies provide 15% of financial assistance
to countries facing balance of payment problems.
30
4. What role do multinational corporations play in international finance ?
Role
45%
40%
35%
30%
25% Role
20%
15%
10%
5%
0%
Borrower Investor Contribute to the None
development
Interpretation :
Multinational corporations are primarily invest 40% in the domestic projects. They are
major borrowers in international markets by 30% and contribute 24% to the
development of local capital markets.
Function
Financial assistance
Loans
Invesment
Interpretation :
The primary function of the international monetary fund is financial assistance which
contribute 60 % in international finance. While the loans contribute 30% to the
international finance and investment contributes only 10%
32
International debt Frequency Percentage
instrument
Eurobond 25 50%
Personal loan 6 12%
Government savings 10 20%
bonds
Corporate equity 9 18%
Total 50 100%
50%
40%
30%
0%
nd oa
n ds ui
ty
bo l on q
ro al b
ee
Eu on gs at
rs in or
Pe av rp
ts Co
en
m
ern
v
Go
Interpretation :
50% of Eurobonds are international debt instrument while 12% are personal loan, 20%
are government savings and 18% are corporate equity.
Interpretation :
60% purpose of a multinational syndicate loan is to pool resources from various lenders
for large projects and the other 20% is contributed towards providing guarantees while
both the issue international bonds and investment covers 10%
34
capital
Diversification of 5 10%
funding options
Exposure to 25 50%
currency risks
Transfer of 15 30%
technology and
expertise
Total 50 100%
Disadvantages
Interpretation:
Exposure to currency risks is the major disadvantage because it contributes 50 % and
transfer of technology and expertise contribute 30% as a disadvantage of using
international sources of finance. While both the access to global capital and
diversification of funding options only contributes 10%
35
Foreign portfolio 10 20%
investment
Sovereign wealth 10 20%
fund
Total 50 100%
Type of financing
70%
60%
50%
30%
20%
10%
0%
FDI FPI Sovereign wealth fund
Interpretation :
60% of people prefer foreign direct investment and both the foreign portfolio
investment and sovereign wealth fund are preferred by 20% of the people.
36
Moderate 15 30%
High 30 60%
Total 50 100%
No impact
Moderate
High
Interpretation :
10% of the respondents say that the exchange rate fluctuation have no any impact on the
international financing options whereas 30% say that it have moderate impact and the
60% say that it have high impact on the international financing options.
11. What are the major risks associated with financing through international
sources ?
37
Risk
45%
40%
35%
30%
25% Risk
20%
15%
10%
5%
0%
Currency Inflation Liquidity All of the
risk risk risk above
Interpretation :
40% of the risk is the currency risk while the inflation risk is 30% and the liquidity risk is
20%
38
CHAPTER – 04
FINDINGS
39
80% define the international sources of finance as financial resources obtained
from foreign international markets and the other 20% define it as only loans from
international markets.
40% of government bonds are considered as a primary source of international
finance for long scale project while 30% are domestic bank loans,25% are foreign direct
investment and 5% are personal savings.
The International Monetary Fund provides 50% financial assistance to countries facing
balance of payment ,the united nations provides 20% financial assistance and both the
world trade organization and export credit agencies provide 15% of financial assistance
to countries facing balance of payment problems.
Multinational corporations are primarily invest 40% in the domestic projects. They
are major borrowers in international markets by 30% and contribute 24% to the
development of local capital markets
The primary function of the international monetary fund is financial assistance which
contribute 60 % in international finance. While the loans contribute 30% to the
international finance and investment contributes only 10%
50% of Eurobonds are international debt instrument while 12% are personal
loan ,20% are government savings and 18% are corporate equity.
60% purpose of a multinational syndicate loan is to pool resources from various
lenders for large projects and the other 20% is contributed towards providing guarantees
while both the issue international bonds and investment covers 10%
Exposure to currency risks is the major disadvantage because it contributes 50 % and
transfer of technology and expertise contribute 30% as a disadvantage of using
international sources of finance. While both the access to global capital and
diversification of funding options only contributes 10%
60% of people prefer foreign direct investment and both the foreign portfolio
investment and sovereign wealth fund are preferred by 20% of the people
10% of the respondents say that the exchange rate fluctuation have no any impact on
the international financing options whereas 30% say that it have moderate
impact and the 60% say that it have high impact on the international financing
options.
40% of the risk is the currency risk while the inflation risk is 30% and the liquidity
risk is 20%
40
CHAPTER – 05
SUGGESTIONS & CONCLUSIONS
Suggestions :
41
★ Many international financial institutions have complex application
processes. Providing clear, straightforward guidelines for funding
applications can make it easier for projects to receive financial support.
★ Many international financial institutions offer rigid repayment schedules.
Offering more flexible repayment terms would make funding more
accessible.
★ Encouraging partnerships between international financial institutions,
governments, NGOs, and the private sector can promote collaboration and
lead to more sustainable financing solutions. These partnerships could be
especially beneficial for large-scale infrastructure or development projects.
★ Providing project teams with technical assistance and mentorship in areas
such as financial management, budgeting, and legal requirements can
improve project readiness for funding. This support helps reduce the risk of
mismanaging funds or failing to meet financial obligations.
Conclusions :
42
In conclusion, international sources of finance play a crucial role in enabling the success
and sustainability of projects across various sectors globally. These sources, ranging from
multilateral development banks and private equity firms to philanthropic foundations and
crowdfunding platforms, provide essential funding to projects that may otherwise
struggle to secure capital. By supporting a wide array of projects, from infrastructure and
education to sustainability and social development, international finance helps drive
global progress, particularly in emerging and developing economies.
Bibliography :
Books :
43
Sachs, Jeffrey D. Penguin Press, 2005.
This book discusses how international financial institutions, such as the World Bank, can
help alleviate global poverty and provide funding for development projects.
Explores how international financial institutions, development banks, and foreign aid
mechanisms contribute to global development.
Williamson, John.
A seminal article explaining the role of international financial institutions like the IMF
and World Bank in shaping global economic policies and financing.
Goyal, A.
An in-depth look at the role of international development finance institutions and their
strategies for supporting projects across the globe.
Focuses on the role of multilateral financial institutions such as the World Bank and IMF
in financing sustainable development projects.
Websites :
https://www.worldbank.org/en/topic/finance
https://www.ifc.org
QUESTIONNAIRE
44
Financial resources obtained from international markets ☐
11.What are the major risks associated with financing through international sources ?
Currency risk ☐
46
Inflation risk ☐
Liquidity risk ☐
All of the above ☐
47
48