Coface Targets Sme Exporters Through Joint Venture

Small and medium enterprises (SMEs), which to date face problems on the export front as developed economies decline to open letters of credit (L/cs), can now get credit protection and guarantee from the world leader in credit insurance, Coface SA.

Global Trade Finance Pvt Ltd (GTF) -- a joint venture among WestLB of Germany (40 per cent), Export Import Bank of India (35 per cent) and International Finance Corporation of Washington (25 per cent) -- has signed a co-operation and debt purchase agreement with Coface.

This will enhance exports from India as credit protection will be made available on buyers situated in 80 countries through Coface's database.

 

This is the second Indian strategic alliance Coface has entered into, the first being with Export Credit Guarantee Corporation (ECGC) for credit insurance. In the venture with GTF, exporters will have access to trade finance as well as credit protection, said Coface regional managing director Bart A Pattyn.

"ECGC is not a bank and nor does it have access to large credit limits. There we are targeting a different segment of Indian exporters -- large trading houses and large-sized corporates -- which already have a line of bank credit," he added.

GTF managing director Veena Mankar anticipates Indian manufacturers "to leap frog into the global market" by outsourcing receivables management to the new entity. Moreover, India's exports have declined by 1.9 per cent, partly on account of the country's failure to move in tandem with the developed nations.

Pattyn added: "We will act as a trade facilitator and take the risk out of export transactions". This is possible as trade receivables are on open account basis, which does not require the need for opening L/cs.

Other factoring services in the country still use L/cs or offer guarantee through the international factor chain. This stated Pattyn is however, limited to 40 countries for taking cross-border risk. Through Coface, Indian exporters have access to information on buyers across 80 countries -- in terms of information, risk assumption (that is the extent to which Coface will offer debt protection) and receivables management.