EFIC will "evolve" finance product range - Financial Services - Australian Export Finance and Insurance Corporation

Business Asia, June, 2003

Australia's Export Finance and Insurance Corporation (EFIC) will strive to evolve their product offerings as their customers' situations change and competition from foreign agencies increase, EFIC general manager for export and project finance Angus Armour said.

Armour said EFIC was mindful that their clients continually face new situations, meaning that EFIC's various export finance products had to be "bespoke rather than off the rack".

"You'll have an individual approach us with a services contract in the Philippines, the next person will have a capital goods export to Sudan--these are exporters with very different issues they're confronting. Just by the very nature of what our customers do we have to be constantly adapting to their circumstance," he said.

"Secondly, the export credit agencies we compete with overseas are also changing and evolving, so we can't afford to stay still."

The export finance products on offer, however, have to maintain a level of consistency, Armour said, in order to avoid confusing the market.

"If you're constantly tinkering, they're (the customer) not actually sure what they're buying. We try and have consistent elements to all the products that we have, because then our customer knows what they're buying, but then you have to adapt the product itself to the circumstances of the transaction," he said.

Market gap

EFIC's export finance arm provides a range of services to Australian exporters, and plays a "market gap" role within the industry. This, Armour explains, means that EFIC may be able to help exporters who have missed out on support from the commercial banking sector.

"We're here to grow exports rather than to grow the size of EFIC--we're very much playing in the 'market gap', which is supplementing the private market rather than competing with the private market," he said. "And consequently a lot of what we do is about adding the capacity to a commercial market provider to allow them to do a deal.

"It's a balance--we also need to be financially self sustaining, so that implies that a profit and adding to our capital base, which will allow us to do more business. But if you look at our portfolio, we certainly take risks that are greater than the average financial institution."

Services

EFIC's export finance products range from direct loans through to political risk insurance. All products under Armour's division are aimed at exports where the terms exceed two years.

"We have a direct loan product which is very simple--we lend money to an overseas buyer to allow them to purchase capital goods or services from Australia," Armour said.

"The product that's linked closely to the direct loan product is the export finance guarantee. Under that facility, we provide a guarantee to the bank that is making a loan on terms and conditions that we agree.

"In that case again we are using a commercial bank to provide support to our clients. We don't necessarily have to provide the same level of support that we do when taking a direct loan--the bank may take a bit of risk, and in that basis we're all better off. The bank's participating and making money; we're participating but we're not having to do every dollar involved--the exporter wins, the buyer wins.

"Another finance product which is targeted at SMEs is the working capital guarantee. We provide a guarantee to a bank here in Australia that they use as security to provide working capital funding to an SME completing an export contract.

"Also, under our performance bond product, we provide a performance bond to a buyer that gives the comfort that the SME will perform under their contract. In terms of insurance products, we have medium term credit insurance, which is simply payment insurance for a term longer than two years. We also have political risk insurance, which protects an investor or an exporter against the political risks associated with working overseas."

Armour says EFIC is mindful of the need to continually make exporters, particularly SMEs, aware of what products they have on offer.

"I don't think you can ever stop promoting the services that you have for the SME sector. Most SME companies are tremendously busy just managing their business, let alone trying to keep track of government programs," he said.