A Study on the Activities of IFIs in the Area of Export Credit Insurance and Export Finance

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Stephens, Malcom;
Sep 2002
Export Credit Agencies (ECAs) play a role of central importance in international trade and investment flows. ECAs are a vital part of the infrastructure supporting trade and have often been considered to be a critical component in a nation's export-led growth strategy. The basic role of an ECA is to support and encourage exports and outward investment by insuring international trade and investment transactions and, in some cases, providing finance directly. One of the most common and most challenging problems that ECAs face is what to do about small exporters. Small exporters are a significant and politically sensitive subject in most countries for various reasons and not necessarily because they make a substantial or potentially substantial contribution to total exports. Facilities tailored to small exporters may be costly to operate largely because of diseconomies of scale: administrative costs per contract may be as high as those for larger exporters, yet income per contract is likely to be lower. The International Financial Institutions (IFIs) have played an increasingly active role in the area of export credit insurance and finance, but the extent and nature has varied significantly between individual IFIs. Helping to establish and support an ECA in the difficult early days has been recognized as an important role for IFIs. Moreover, IFIs can play a part in helping to address gaps in the availability of trade finance and working capital -especially for Small and Medium-Sized Enterprises (SMEs)- which can exist and which can be helped by trade facilitation arrangements of various kinds. IFIs have been active in developing programs to assist in national and regional trade development and facilitation efforts. Access to and availability of appropriate financial tools, including export credit facilities, have been components of some of these efforts. IFIs, even with their relatively modest involvement in supporting the export credit field, have taken a variety of different approaches. With trade a key agenda item for IFIs, it seems inevitable that there will be a continuing and even growing focus on trade finance systems, including export credit schemes. Looking at the experience of other IFIs, it seems that the most successful facilities and initiatives were designed to meet specific rather than general objectives problems; and worked with existing market practices and documentation and did not seek to reinvent mechanisms or to apply unduly complicated documentation or practices.