What Is the Export-Import Bank of the United States?
The Export-Import Bank of the United States (EXIM) is the official export credit agency (ECA) of the U.S. An ECA is a public entity that provides loans, guarantees and insurance to companies in the home country that seek to do business in emerging markets. This reduces the risk to a company of doing business in those markets and thus helps promote the exports of the home country.
Understanding the Export-Import Bank of the United States
The Export-Import Bank of the United States was created in 1934 and operates under a charter which is periodically reviewed by Congress. It is a federal agency that supports U.S. jobs through facilitating exports of goods and services. It generates revenue from interest and fees and has contributed $9.4 billion to government coffers since 1992. Risk management is prudent, with a reported default rate of 0.497% as of September 2019.
Rather than competing with private sector lending, the agency looks to accept the type of country risk (political or commercial) that private businesses are unable or unwilling to take on. EXIM offers trade finance solutions such as insurance against foreign default, working capital guarantees, guarantees on letters of credit extended by foreign banks, and loans provided to potential export purchasers. It also allows domestic businesses to take out loans backed by foreign receivables or foreign assets. The bank considers itself as an agent that helps level the playing field for U.S. exporters, as there are around 115 ECAs globally that support their domestic exporters.
Importance of the Export-Import Bank of the United States (EXIM Bank)
The bank is important to small businesses. The credit and guarantees EXIM provides helps small exporters to expand into new and riskier markets. In the 2019 fiscal year, more than 89% of the bank's transactions benefited small exporters. EXIM authorized nearly $8.2 billion in export short-term export credit and working capital guarantees to support $9.1 billion of exports and an estimated 34,000 jobs. The agency claims to have supported 144,000 jobs annually since 2009.
In the previous year, EXIM provided $3.3 billion in export short-term export credit and working capital guarantees to support $6.8 billion of exports and an estimated 33,000 jobs.
EXIM is lead by a five-member board of directors representing both political parties. Board members are appointed by the U.S. president and confirmed by the Senate. The agency lacked a quorum among its the board of directors between July 2015 and May 2019.