export credit agency

An export credit agency is an institution that provides credits, guarantees, insurance and similar financial products to support international trade operations, in particular, the sales of national companies abroad.

In other words, an export credit agency is an entity that grants loans and other financial services to companies or entrepreneurs who are dedicated to exporting.

It should be remembered that exporting is, in general, the sale of goods or services to another country.

In this sense, by granting credit insurance to the exporter, for example, the agency would be protecting the seller (the local company). This, in case the buyer (the importer from abroad) does not comply with the payment of the account receivable (In this example the transaction would have been made on credit).

Characteristics of an export credit agency

Among the characteristics of an export credit agency we can highlight:

  • It can be a government entity, quasi-government (incorporating a part of private shareholders) or even private (some private financial entities have a specialized branch in this area of ​​export). In the following points, we will focus on the first two cases.
  • When these agencies are promoted by the State, their objective is to promote the economic growth of the country. This, by supporting export activity.
  • Related to the previous point, these agencies seek to make local products better known abroad. This could have a positive impact on commercial activity and, therefore, a greater income of foreign currency to the country and the generation of employment.
  • The activity of these agencies is relevant because in some cases banks and the rest of the more traditional financial system may refuse to finance certain business projects or businesses, or may demand a very high interest rate. This, because they consider that there is a high level of risk.
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Example of an export credit agency

An example of an export credit agency can be the Spanish Export Credit Agency, which has existed since 1971.

As indicated on its official website, this Spanish agency is dedicated to granting insurance by the State. This, to protect Spanish companies against political, commercial and extraordinary risks.

At this point, we must remember that a political risk is the probability that the economic activity of a country or sector will be impacted by the decisions of a government.

Likewise, commercial risk is the possibility that a company suffers losses due to non-compliance with the obligations to which a private party is subject in a contract. In other words, in the case that concerns us in this article, we would be talking about the importer not paying the debt he has with the exporter, for example.

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