What is the Export-Import Bank Of The United States
The Export-Import Bank Of The United States (Ex-Im Bank) is the official export credit agency (ECA) of the United States. 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 an individual company of doing business in those markets, and thus helps promote the exports of the home country.
BREAKING DOWN Export-Import Bank Of The United States
The Export-Import Bank Of The United States (Ex-Im Bank) was created in 1934 by Congress, and operates under a charter which is periodically reviewed by Congress. It is a federal agency whose mission is to support American jobs through facilitating exports of goods and services. It is a self-sustaining agency that does not operate at a cost to taxpayers. Risk management is prudent, with a reported default rate of just 0.266% as of September 30, 2016.
Rather than competing with private sector lending in the United States, the agency looks to accept the type of country risk (political or commercial) that private businesses are unable or unwilling to take on. The Ex-Im Bank offers various forms of trade finance solutions, including insurance against foreign default (whether for commercial or political reasons), working capital guarantees, guarantees on letters of credit extended by foreign banks and it provides loans 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 American exporters, as there are around 96 ECAs globally that support their own domestic exporters.
Importance of the Export-Import Bank of The United States (Ex-Im Bank)
The agency's area of activity is particularly important to small business, with the protection and certainty it provides helping to enable them to expand into new and riskier markets. In FY 2016, over 90% of Ex-Im Bank's business (equivalent to over 2600 transactions) was with small businesses.
The agency claims to have supported 1.7 million jobs through all 50 states over the last decade. However, the agency currently lacks a quorum on the board of directors and as a result has not been fully operational since 2014. According to its 2017 Annual Report, the Bank authorized over $3.4bn of mainly short-term export credit and working capital guarantees to support an estimated $7.4bn of U.S. exports and an estimated 40,000 jobs. However, these figures are sharply lower than FY 2014 (its last fully operational year) when the Bank authorized over $20bn in financing that supported nearly 165,000 American jobs.