Export credit agency (ECA)
An export credit agency is a government-backed institution that supports exports from its home economy by providing insurance, guarantees and, in many systems, official financing when private markets will not take the risk on acceptable terms. UK Export Finance describes itself as the UK's export credit agency and a government department: it works with private credit insurers and lenders, exists to complement not compete with the private sector, and aims to ensure that no viable UK export fails for lack of finance or insurance, sustainably and at no net cost to the taxpayer.
Export credit agency roles on bank desks
Banks interact with ECAs as covered lenders, funded partners or applicants for pure cover. Typical products help exporters win contracts by offering financing terms to buyers, fulfil contracts through working-capital support, and get paid through insurance against buyer default. UKEF's mandate statement covers companies of any size and sectors from capital goods to services and intangibles. EXIM, the official export credit agency of the United States, states that it does not compete with private lenders, assumes country and credit risks the private sector is unable or unwilling to accept, and helps level the playing field by matching financing other governments provide to their exporters.
The Berne Union is the global association for the export credit and investment insurance industry. Its members include government-backed official export credit agencies, multilateral institutions and private credit insurers. Berne Union materials state that most industrialised countries, and many emerging economies, provide official support to cross-border trade and investment through ECAs, alongside a large private credit and political-risk insurance market.
Instruments, cover and official support forms
Core ECA instruments include:
- buyer credit guarantees or insurance on bank loans to foreign buyers
- supplier-credit insurance or bills-and-notes support for exporter receivables
- short-term and medium- or long-term export credit insurance
- working-capital and bond support for exporters
- in some systems, direct lending to buyers
EXIM supports international buyers of US capital goods by guaranteeing or insuring loans and, in some cases, by extending direct loans, generally after a cash payment of at least 15% and with official support up to 85% of contract amount. Those ceilings align with OECD Arrangement disciplines for Participants' officially supported export credits of two years or more. Arrangement official support may be pure cover, official financing support (direct credit, refinancing or interest-rate support), or a combination.
Premium and guarantee fees (ECA premium) price country and buyer risk under national schedules constrained, for Arrangement business, by minimum premium benchmarks. Legal form varies: UKEF is a government department (operating name of the Export Credits Guarantee Department); peer ECAs may be agencies, public corporations or private companies acting under public mandate.
Boundaries with private insurers and multilaterals
ECAs are national export-promotion institutions, not general-purpose development banks. Multilateral insurers such as MIGA sit beside ECAs in the Berne Union community and focus on cross-border investment guarantees. Private credit insurers compete and cooperate with ECAs through co-insurance and reinsurance. Desks treat ECA cover as official support with mandate, content and Arrangement constraints that private market policies do not share.