Improving the Role of Eximbanks/ECAs in the OIC Member States
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insurance speaking, export credit refers to the credit extended by exporters to importers
(supplier credit) or the medium- and long-term loans used to finance projects
and capital goods exports (buyer credit). It includes credit extended both during
the period before goods are shipped or projects completed (the preshipment
period or precredit period) and the period after delivery or acceptance of the
goods or completion of the project (the postshipment period or credit period).
Export credit
agency
An institution providing export credit insurance facilities. All export credit
agencies were at one stage government owned or controlled or, if they were
private companies, operated on government account. This is no longer the case,
because the position is now rather more complicated, and so there is today
probably no single meaning for the term "export credit agency." It is probably
best to define it in terms of the functions of the organization rather than its
status. There is, in any case, no single model for an export credit agency. Their
organization, function, status, and facilities differ between countries. Ideally, the
structure and function of an export credit agency should reflect the conditions in
and the needs of the country in which it operates. These can change as time
passes, even within the same country. Attempts to transfer one model from one
country to another without appropriate adaptation nearly always cause more
problems than they solve. Most export credit agencies belong to the Berne
Union, except for those that are too new or too small to meet its membership
criteria.
Facility A generic term referring to a policy or other product issued by an export credit
agency. It can refer either to the categories of cover the agency provides (e.g., pre
shipment cover or investment insurance) or to individual policy documents
issued to an exporter or a bank.
Factoring A trade finance mechanism whereby an exporter sells its export receivables
(bills of exchange or promissory notes, or simply issued invoices, which the
exporter is selling on an open account basis) at a discount. The company
purchasing the receivables is called a factor. Factors are normally specialized
financial services companies, but many are owned by banks. Normally, after the
factor has purchased a receivable, the importer or buyer pays the factor directly.
Some factors actually issue the invoices to buyers and, in effect, operate the
exporter's sale ledgers. Some factors operate on a non-recourse basis (i.e., they
assume the risk of nonpayment). Less frequently, the factor will take recourse to
the exporter for all or part of the sums involved in the event of nonpayment or
delayed payment by the buyer. Some export credit agencies have special policies
or facilities for factors to cover both political risk and commercial risk.
Foreign goods,
foreign content
Goods and services included under export contracts that originated elsewhere
than in the exporting country. Traditionally, export credit agencies have mainly
supported the export of goods and services from their own countries. In the area
of short-term business, however, the national origin of covered goods has
become increasingly blurred, especially as many export credit insurers and
many large multinational companies operate in and out of a number of countries,
and as more business is done on an own-account basis with private market
reinsurance. Rules governing foreign content are applied more carefully in the
area of medium- and long-term credit, where the conventional guideline is that
such goods may be covered up to a maximum of 15 percent of the total national
exported amount. But special arrangements apply within the European Union,
and some agencies enter into reciprocal arrangements with other export credit