Improving the Role of Eximbanks/ECAs in the OIC Member States
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Although overall a successful ECA, MEXIM is a case where the credit insurance business is
marginalized in favour of the mainline finance activities. The short-term export credit insurance
business seems to have been left to foreign providers. There may be a logic behind this strategy,
since the private market insurers are normally catering to the demand for short-term cover. So, it
makes sense for NEXIM to focus on providing cover for exports of medium-term nature.
However, this may leave SMEs without insurance support, as the foreign insurers tend not to
focus on this segment.
3.5.7 Pakistan
Pakistan Export Finance Guarantee Agency Ltd (PEFG)
Description:
Various credit facilities are available in Pakistan through State Bank of Pakistan. These include
inter alia Export Finance Scheme under which short term credit is provided by the banks and
refinanced by the State Bank to support exports from Pakistan, medium and long term financing
for purchase of machinery and credit facility for export sales on down payment in foreign
currency. An Export Credit Guarantee Scheme was introduced in March 1962 to underwrite the
exporter’s financial risk to the extent of 75 per cent of loss sustained on commercial risks and 85
per cent on the political risks. These risks were not covered by normal insurance guarantees and
hence the security provided by the Scheme would encourage exporters to explore new markets.
In 2000, Asian Development Bank established Pakistan Export Finance Guarantee Agency which
was unsuccessful according to ADB’s project completion report.
In Trade Policy 2002-03 it was highlighted that the existing Export Finance Scheme has certain
unavoidable limitations like asset based collateralization, short tenor etc. Credit sale was
increasingly becoming norm in the international trade. Pakistan did not have a proper supplier’s
credit scheme to cater to these requirements. The need for an EXIM Bank, perhaps with built-in
credit insurance system, appeared imminent. Accordingly work was started on setting up of
EXIM Bank immediately. After much deliberations, discussions and on the advice of the ADB it
was decided that instead of a new institution such as EXIM Bank the ADB-assisted Pakistan
Export Finance Guarantee Agency (PEFGA) to be converted into an Export Credit Agency (ECA)
with fresh injection of capital and change in the ownership structure. The name PEFG was
retained afterwards.
The Pakistan Export Finance Guarantee (PEFG) agency was aimed at improving small, medium
and emerging exporters’ access to bank credit by providing cover pre-shipment performance
risks and issue bankable collateral to SME exporters. The original objective of ADB’s investment
was to help in the overall development of Pakistan's export sector.
These guarantees were to provide coverage of 80% of the loan amount. PEFG charged a
premium of 1 – 4% for each transaction, depending on the service obtained and the risk
assumed as well as an additional fee of 0.25% for each transaction, not exceeding 10,000
Rupees. There was also consideration to provide export credit insurance, including both pre-
shipment and post shipment, to exporters.
The company is dormant since 2009. According to the ADB in its Project Completion Report, the
project did not meet success, based on a number of factors that did not materialize. The Agency