What Is an Export Credit Agency (ECA)?
An export credit agency offers trade finance and other services to facilitate domestic companies' international exports. Most countries have ECAs that provide loans, loan guarantees and insurance to help eliminate the uncertainty of exporting to other countries.
The purpose of ECAs is to support the domestic economy and employment by helping companies find overseas markets for their products. ECAs can be government agencies, quasi-governmental agencies or even private organizations—including the arms of commercial financial institutions.
Understanding Export Credit Agencies
ECAs were previously a lender of last resort, stepping in only when private-sector financing was unavailable. But ECAs have taken on a greater role since the global financial crisis, providing the necessary support as increasingly risk-wary private lenders pulled back from export finance. Now there are scores of national ECAs worldwide, collectively providing hundreds of billions of dollars a year toward companies’ efforts to sell goods and services abroad.
- Export credit agencies offer loans, loan guarantees and insurance to help domestic companies limit the risk of selling goods and services in overseas markets.
- ECAs can be government agencies or private lenders, or semi-government bodies.
- After commercial banks retreated following the global financial crisis, ECAs became leading players in international project financing and exports.
ECAs are increasingly critical to national industrial strategies. They can arrange government-backed loans, guarantees and insurance in some of the world's riskiest and most volatile markets. In many cases, development projects such as major infrastructure might never get built without their support.
ECA Offerings and Impact
ECAs charge premiums when they offer financial services. Interest from clients is sometimes an alternative to the premium, or the ECA might charge it in conjunction with the premium. Most ECAs offer insurance, as well as other services, for both medium terms—anywhere from two to five years—and long terms, which are five to 10 years.
The Organisation for Economic Cooperation and Development (OECD) has argued that ECAs operating in the public sector have a relatively small contribution to underwriting aggregate financing in trade around the world. However, the organization has conceded that ECA support of international trade is an increasingly important factor in individual transactions and for projects being undertaken in developing countries. The availability of the funding that ECAs provide is vital for project completion and the full realization of the resulting exports in these countries.
The OECD offers a list of official ECAs around the world.
ECAs play a major role in world trade. The export credit guarantees they offer lower the risk of private lending. ECAs are therefore becoming leading players in international project financing and exports. ECAs such as Ex-Im Bank help fill the funding gap that private-sector lenders create with their inability or unwillingness to provide financing. They help all products and services compete on a global scale.
The Export-Import Bank of the United States
The official ECA in the U.S. is the Export-Import Bank of the United States (EXIM, an independent executive-branch agency. According to EXIM, one of its primary roles is "leveling the playing field" when U.S. exporters "face foreign competition backed by other governments." To do so, it will "match or counter the financing offered by approximately 85 ECAs around the world."