EXIM bank wants greater take up of trade credit insurance by SMEsWednesday, September 15, 2021
BY KELLARAY MILES
Small and medium-size enterprises (SMEs) engaged in exporting are being urged by the National Export-Import Bank of Jamaica (EXIM Bank) to take greater advantage of its trade credit insurance (TCI) facility in order to ensure goods and credit protection when trading.
“The large exporting houses use it but a lot of the smaller exporters have not been using the product, so what we have been trying to do is to get them to fully understand the offerings so that they will become more willing to use the facility in marketing their products and also to gain protection from default payments.
“We have found that there is renewed interest so we hope that when these businesses measure the opportunities that the product carries, we will begin to see a great uptick in the usage of the product by new entrants along with the continued usage of longstanding members,” said Allan Thomas, manager of loan origination and business development at EXIM Bank, during a recent interview with the Business Observer.
The issue of low take-up by smaller companies has been a longstanding one mainly due to the fact that these entities tend to have small buyers and in many instances minimal collateral while larger firms are more likely to insure their receivables as part of their risk management.
Trade credit insurance is a method for protecting a business against its commercial customers' inability to pay for products or services, whether because of bankruptcy, insolvency, or political upheaval in countries where the trade partner operates.
The TCI covers both foreign and domestic receivables against commercial and political risks of non-payment by buyers. The product is strongly recommended for companies entering into new markets, developing new customer relationships, or simply looking to leverage their cash flows from having extended credit terms to buyers.
“These businesses can now sell to persons whom they may not be familiar but that want their products. In offering them credit, this can result in increased sales and opportunities for entry into new markets,” Thomas added.
The product, which also covers unforeseen events such as novel coronavirus pandemic, provides further protection to companies which may have difficulties in getting payments from customers during these challenging times. Through special buyer limit provisions, the policy also allows for further protection against default by customers, offering protection of up to 85 per cent on receivables under commercial covers, and up to 90 per cent under political covers. Additionally, businesses can access working capital support of up to 80 per cent to help with post shipment financing.
“The TCI is such as useful product and since we have found that a lot more companies are wishing to export, along with the challenges brought on by the pandemic and the difficulties to secure payment from some customers, we thought it fit to re-engage businesses particularly, small exporters to take advantage of this policy,” Thomas said.
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