Improving the Role of Eximbanks/ECAs in the OIC Member States
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failed attempts. Worse practices can help inform what not to do when considering how a country
can develop its export credit system.
5.5. What Makes an ECA Effective?
An ECA is just one instrument of government policy. To be effective, the ECA needs to be well-
integrated into the government’s policy objectives, decision-making processes, and fiscal and
borrowing plans. The ECA needs integrity in its governance arrangements, with clear lines of
responsibility for goal setting and accountability for the achievement of goals.
The best ECA is one which strikes an appropriate balance between a) minimizing the risk
position of the government; b) optimizing the involvement of the commercial banks and private
financiers and c) meeting the needs of exporting companies.
Sound governance is the single most important factor in the success or failure of an ECA. Like all
financial institutions, ECA financing has embedded risks to the government which need to be
recognized, understood, and managed effectively. Fiscal surprises due to unanticipated losses, or
surpluses, which carry through to the government’s bottom line can be disruptive to anticipated
outcomes for the government’s economic and financial performance more broadly.
For government sponsors of ECAs, the question is how to structure the relationship in a manner
which manages these risks effectively, and efficiently, while ensuring the ECA has the tools and
incentives to deliver on its export promotion mandate.
The ECA must also seek to work very closely with the banks and other financial institutions and
maximize the involvement of these other players to ensure its position in the market and
facilities are applied in an optimal manner.
ECAs are also designed to serve the needs of exporters by focusing on understanding the nature
of these needs and subsequently providing business solutions to meet these needs.
Simultaneously, an ECA must not seek to subsidize exporters, but create an enabling
environment that promotes export growth and development. This also means understanding the
role of and collaborating with private sector commercial players including banks and insurance
companies in the market. As a result, ECAs play a critical role in the export ecosystem, ensuring
all players are effectively engaged and where applicable, supported by the institution.
Among other objectives such as to diversify the export base in terms of sectors, markets and
types of exporters, ECAs are intended to fill gaps that would otherwise go unaddressed in a
market including those related to financing and insurance needs. This entails ensuring private
players are not crowded out by ECA activities but are instead enabled and complemented. To this
end, ECAs must undertake extensive market gap analysis upon which strategic and operational
decisions about what, when and where interventions are conducted.
As government/quasi government institutions, ECAs are expected to establish appropriate risk
management systems to establish and monitor risk limits. This is particularly critical to ensure
pricing to risk that would fulfill the institution’s financial sustainability requirements while
providing a risk-weighted price on financing intended to make exporters competitive.
There is a tension to manage between being a last resort insurer or lender only filling gaps and,
on the other hand, breaking even and avoiding losses. Doing only what others will not do means
not only a very limited and poor spread of risk and extreme difficulty in breaking even, but also