Improving the Role of Eximbanks/ECAs in the OIC Member States
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3. the need to be financially self-sustaining while at the same time only serving areas of the
market that the private providers deem too risky or where costs cannot be fully
recovered from the client
4. the need to be staffed with individuals who have the requisite public and/or private
sector oriented expertise and meet other relevant criteria, while having to follow civil
service hiring requirements and restrictions
5. the need to operate independently from the government while still being subject to
various forms of government/political guidance to take a certain piece of business which
otherwise would fall outside of normal lending criteria
6. the need to nurture clients through subsidized technical assistance, training and
advisory services while also acting as a catalyst by facilitating the direct involvement of
private financiers
7. the need to use resources efficiently, prudently and transparently while being
accountable to the shareholder/taxpayer.
These challenges are often contradictory and pose important dilemmas. More often,
management is given little guidance about how to deal with competing priorities or policy
dilemmas. For example, if a product can make money, then in theory it should be attractive to the
private sector. On the other hand, if the ECA is offering programs that the private financiers are
not willing to do, by definition it is difficult to cover costs (much less earn a surplus to be able to
provide other services which produce little or no income).
A key dilemma for most (if not all) ECAs is the inherent motivation to “grow the business”, simply
measuring success by how much additional business volume is supported. However, it is
important to note that this may not be an appropriate strategic objective in itself for a
development bank; rather the goal could be to develop the business to the point at which it
becomes a commercially attractive product line where demand and market awareness have been
fostered.
ECAs can provide to the private market players a “demonstration effect”, i.e. showing that a
particular product can earn a commercially attractive rate of return, thus encouraging the
private sector to enter into these segments of the market. Often, the issue is that the perception
of risk by the commercial banks is too high. This however does not mean that ECAs should
necessarily charge a subsidized price, but rather demonstrate to commercial banks that an
acceptable rate of return is possible for the risks involved. The special challenge for ECAs is
recognizing when the demonstration effect has been successful and the time is right to retrench
from this particular market segment.
Some common success factors to ensure that the ECA is on the right path include:
1. Sensitivity to the capacity and evolving needs and aspirations of exporters and
market players (banks, insurers, etc.) combined with awareness of government
priorities must influence ECA policy design and its interactions with both public and
private sector players.