ECGC to launch factoring business

Export Credit Guarantee Corporation of India (ECGC), the fifth largest credit insurer of the world in terms of national exports coverage, will be launching a full-fledged factoring business this month.

The international export factoring business will be an inhouse division of ECGC in Mumbai. For financing facilities with exporters, ECGC is in tie-up talks with banks such as IDBI, HDFC and Corporation Bank.

"We have 20 exports contracts in maturity factoring scheme and want to go to full fledged factoring business. We will be tying up with a bank and will later explore the possibility of starting our own finance," said S Prabhakaran, executive director, ECGC.

The exporter will approach ECGC and will have to submit the invoices. For each invoice, ECGC will endorse and ask the partner bank to finance 80-90 per cent of the invoice value. On ECGC's endorsement which will be backed by irrecoverable guarantee, the bank will finance the exporter.

The exporter will assign the documents to ECGC. The money will then be paid to ECGC by the import factor (the import factor gives collection service and credit protection and will cover the risk on behalf of buyer or debtor).

For every country, ECGC will tie up with 2 to 3 import factors or have arrangements with atleast one factor in a major importing centre depending on the volumes and the transactions.

"Depending on the credit worthiness of the overseas buyer, transaction limit could go upto Rs 10 crore," said Prabhakaran.

"We aim to achieve a turn over of around Rs 100 crore in export factoring by March 2008," he added.

"With the setting up of National Export Insurance Account by the Government of India, ECGC would take steps to identify potential project of exporters and explore the opportunities for boosting Indian project exports. ECGC and many leading project exporters are already in dialogue in respect of some large projects in Indonesia, Vietnam, Iran and Ethiopia, said Prabhakaran.

Speaking about the other plans in the offing for ECGC, Prabhakaran said, "ECGC is in its golden jubilee year and we aim to make the administration of ECGC covers more simpler including the processes involved, getting all our offices ISO certified by the end of this financial year, offering tailor made covers for an exporter or a banker, enhancing utilisation of IT system."

ECGC is also in the process of setting up an institute of international standard on export credit insurance and related matters.

The present paid-up capital of ECGC is Rs 800 crore and authorised capital Rs 1,000 crore.