Improving the Role of Eximbanks/ECAs in the OIC Member States
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Expertise on these points should be available within existing banks or the Central Bank or Banking
Supervisor.
But differences in documentation and risk appraisal (including of security and pledged asset
assessment) are not the only differences between insurance and financing.
A significant factor is that an insurance entity requires funds for its own administration operations
and to pay claims. But an entity providing financing must obviously have the funds to on lend.
Such funds are unlikely to be available from its own capital. So early consideration needs to be given
to how and on what basis the entity will itself obtain financing for its own lending. For example, will
it borrow itself locally or internationally and will this be in own name or will there be an explicit or
implicit Government guarantee? Or will all borrowings be undertaken by the central Bank or by the
body responsible for the Government’s borrowing?
A financing institution will normally borrow wholesale and lend retail or borrow in advance of
lending.
And it is very unlikely to borrow on a fully matched basis, i.e. borrow specifically to lend on a case by
case basis
So, against this background, the entity will need to hold funds in advance of lending them and thus
have some Treasury Management functions. These can be a useful source of income but this is a
technical and specialist function. EDC of Canada for example earns valuable income from the
management of funds borrowed in advance of disbursement.
h. Timetable
It is very important that a realistic timetable be set at an early date and that it should be subjected to
regular review and that public announcements on it should be avoided unless carefully reviewed by
the Steering Committee.
Drawing up the timetable and reviewing it regularly are tasks for the Steering Committee supported
by the new entity.