Demystifying export credit insurance

EXPORT Credit Insurance protects an exporter of products and services against the risk of non-payment by a foreign buyer.

In other words, export credit insurance significantly reduces the payment risks associated with doing business internationally by giving the exporter conditional assurance that payment will be made if the foreign buyer is unable to pay.

Simply put, exporters can protect their foreign receivables against a variety of risks that could result in non-payment by foreign buyers. Export credit insurance generally covers commercial risks (such as insolvency of the buyer, bankruptcy, or protracted defaults/slow payment) and certain political risks (such as war, terrorism, riots, and revolution) that could result in non-payment.

e policy also covers currency expropriation and changes in import or export regulations. Cover is offered either on a single-buyer basis or on a portfolio multi-buyer basis for shortterm (up to one year) and medium-term (one to five years) repayment periods.

Important features of the Export Credit Insurance policy:

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e policy allows exporters to offer competitive open account terms to foreign buyers while minimising the risk of non-payment.

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When foreign accounts receivables are insured, lenders (banks, MFIs) are more willing to increase the exporter’s borrowing capacity and offer more attractive financing terms; thereby boosting working capital.

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Even creditworthy buyers could default on payment due to circumstances beyond their control.

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With reduced non-payment risk, exporters can increase export sales, establish market share in emerging and developing countries, and compete more vigorously in the global market.

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However, it should be noted that the policy

not cover physical loss or damage to the goods shipped to the buyer, or any of the risks for which coverage is available through marine, fire, casualty or other forms of insurance.

In addition to Export Credit Insurance companies against the risk of non-payment by local buyers. e standard percentage of cover is up to 80%. e Domestic Credit Insurance Policy covers losses arising from commercial risks only.

Where can one get Export Credit Insurance? Export Credit Guarantee Corporation of Zimbabwe (Private) Limited (ECGCZ) is an Export

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