Interest make up scheme explained

An interest make up scheme is the market term commonly used for interest rate support under the OECD Arrangement: an arrangement between a government and banks or other financial institutions which allows the provision of fixed rate export finance at or above the Commercial Interest Reference Rate (CIRR). Article 5 a) of the January 2026 Arrangement text lists interest rate support as one of the two forms official financing support can take, alongside direct credit or financing and refinancing, and Annex XIII (the List of Definitions) is where that category is formally defined. The scheme sits inside official financing support, not inside pure cover.

Article 5 a) separates export credit guarantee or insurance, called pure cover, from official financing support, which comprises direct credit or financing and refinancing, or interest rate support. A third sub-item permits any combination of the above. An interest make up scheme therefore answers how a fixed rate at or above CIRR is delivered when commercial banks remain the lenders. It does not by itself identify who bears credit risk or whether a guarantee layer also exists.

Interest make up scheme within official financing support

Under an interest make up scheme, banks or other financial institutions fund and lend. The government or export credit agency supports the fixed rate outcome required by policy so that the export finance rate can be offered at or above CIRR. Direct lending, by contrast, places the official institution in the loan as creditor or direct financier. Refinancing is grouped with direct credit in the same official financing support family in Article 5 a).

Article 18 a) requires Participants providing official financing support for fixed rate loans to apply the relevant CIRRs as minimum interest rates. CIRRs are established according to principles that they should represent final commercial lending interest rates in the domestic market of the currency concerned, closely correspond to the rate for first class domestic borrowers, be based on the funding cost of fixed interest rate finance, not distort domestic competitive conditions, and closely correspond to a rate available to first class foreign borrowers. Interest rate support is not authority to undercut CIRR.

Article 18 b) states that the provision of official financing support shall not offset or compensate, in part or in full, for the appropriate credit risk premium to be charged for the risk of non-repayment pursuant to Article 20. Interest make up addresses the interest rate structure. It does not replace Arrangement premium floors for credit risk.

CIRR as the fixed rate floor

Article 19 states that the CIRR for official financing support provided under the Arrangement and its Annexes, other than the Aircraft and Ships Sector Understandings, is determined and applied according to Annex XII. OECD CIRR documentation states that a CIRR is fixed for each currency of the Participants and that CIRRs are set on the 15th of each month. The maturity of the government bond used in construction follows a formula involving drawdown and repayment periods, rounded to the nearest year, capped at ten years and floored at three years.

Those mechanics show that CIRR is a published Arrangement benchmark schedule, not a negotiated discretionary rate set inside each interest make up scheme. The scheme is the institutional arrangement that enables banks to deliver fixed rate export finance consistent with that floor. Lock-in and holding period rules in the Arrangement definitions govern when a CIRR is fixed for a transaction.

Contrast with pure cover and direct lending

Pure cover is official support by way of export credit guarantee or insurance only, without official financing support. A bank-intermediated buyer credit guarantee illustrates pure cover where the bank lends and the ECA guarantees non-payment. UKEF describes its Buyer Credit Facility as a guarantee to a bank making a loan to an overseas buyer, with the lending bank protected against non-payment of principal and interest instalments. That product description is guarantee cover. It is not itself a definition of interest rate support, although a buyer may borrow at fixed or floating rates under the facility.

Direct lending answers who lends. Interest make up answers how fixed rate finance at or above CIRR is supported when banks lend. A transaction may combine forms under Article 5 a) 3). Credit analysis still needs to separate the funding role, the interest rate support role and the credit risk cover role.

Notification schedules in the Arrangement ask whether official financing support is provided and whether it is a direct credit, refinancing or interest rate support. That reporting field confirms that interest rate support is a distinct official support category for Participants, not an informal market label outside the Arrangement taxonomy.

Premium, CIRR and bank balance sheet

Participants shall charge premium, in addition to interest charges, to cover the risk of non-repayment of export credits under Article 20. Premium rates shall be risk-based, shall converge and shall not be inadequate to cover long-term operating costs and losses. Article 21 requires that Participants charge no less than the applicable Minimum Premium Rate. An interest make up scheme that supports the interest rate does not remove those premium obligations.

The credit implication of an interest make up scheme is primarily funding and interest rate allocation. The bank remains lender of record under the government arrangement. Fixed rate export finance must meet CIRR. Credit risk may still be retained by the bank, transferred through pure cover, or shared through a combination. The Arrangement forbids using official financing support to offset the credit risk premium.

Interest make up scheme practice therefore sits squarely inside OECD Arrangement official financing support. The formal name is interest rate support. The market name emphasises the make up between market funding costs and the fixed export finance rate delivered at or above CIRR. Both point to the same institutional category: bank-intermediated fixed rate official support bounded by CIRR and separate from premium.