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BACK             Issue No. 1/2002
 Credit Limits approved by ECGA reached RO 140.25 million by end of 2001

 Omani Non-Oil Exports increased

 "Partners in Progress" award presented to ECGA by Oman National Dairy Products (SAOG)

 Prague Club Meeting held in Vienna, Austria

 Meeting in Jeddah-Saudi Arabia

 Questions and Answers

 Tips to Exporters

 
ECGA's Partnership with the Credit Alliance


 
Credit Limits approved by ECGA reached RO.140.25 million by end of December 2001
The Export Credit Guarantee Agency under the Chairmanship of H E Sheikh Yaqoob bin Hamed Al Harthy approved a total credit limit worth RO.140.25 million as of the year 2001. This compared to RO.117.1 Million for the corresponding period for 2000 or an increase of 16.5%. The number of exporters for the year 2001 also increased from 110 to 135 exporters. The number of overseas buyers reached to 2703 compared to 2310 for corresponding period of year 2000 to 88 different countries.

 
Omani Non-Oil Exports increased
As per the latest statistics obtained from the Ministry of National Economy, Omani non-oil exports during the first eight months period of 2001 were RO.558.7 million compared to RO.502.5 for the corresponding eight period of the year 2000. The total non-oil exports consist of both re-exports as well as Omani produced exports. The Omani produced non-oil exports were RO. 184.5 million or 33.0% of total non-oil exports while re-exports were RO. 335.3 million. Omani non-oil exports registered increases of 10.3% for the first eight months of the Year 2001 compared to RO.167.2 for the corresponding eight months period of 2000. Non-oil Omani exports include such products as dates, lemon, mineral water, livestock, textile, vegetable oils and other industrial produced products. The re-exported goods include foodstuff, beverages, tobacco, machinery, electrical equipment, spare parts and other products.

 
"Partners in Progress" award presented to ECGA by Oman National Dairy Products (SAOG)
The Export Credit Guarantee Agency was presented " Partners in Progress" Award by Oman National Dairy Products Co. Ltd. (SAOG) in recognition of the Agency’s valuable support on the occasion marking the Company’s 25th anniversary celebration (1976 – 2001). The Oman National Dairy Products (SAOG) is involved in the production of milk, juices, ice cream , yoghurt and other dairy products. Over the years, the company has established a strong presence not only in the Sultanate of Oman but also throughout the world. It is one of the first exporters to avail the export credit insurance of ECGA since 1991 and export its products to GCC and many other countries throughout the world. The Agency congratulated the Company for its excellent accomplishment as it celebrates its Silver Jubilee.

 
Prague Club Meeting held in Vienna, Austria
The Prague Club held its second meeting of the year in Vienna, Austria from 13th to 14th November 2001. Mr. Nasir bin Issa Al Ismaily of ECGA attended the meeting. The Prague Club operates under the auspices of the Berne Union that is Secretariat of the International Union of Credit & Investment Insurers. The Export Credit Guarantee Agency of the Sultanate of Oman is now a fully fledged member of the Prague Club. Other members of the Prague Club include ECAs from countries in Central and Eastern Europe, Iran, Philippines, Malaysia, Thailand, China, Algeria and Jordan. Also represented were Observers from the Saudi Development Fund and MDPB of Macedonia. The Islamic Corporation of Investment & Export Credit – multilateral ECA, from Islamic countries also participated in the meeting. The Prague Club elected Mr. Pavol Parisek the General Manager of the EGAP from Czech Republic as the Chairman of the Club. The Prague Club thank Mr. Anne Van’t Veer, the former Secretary General of the Berne Union for his continuous support of the Club. Mr. Van’t Veer has now joined Amsterdam Trade Bank – member of Alfa – Bank Group as the Managing Director.

 
Meeting in Jeddah - Saudi Arabia
The second meeting of the Export Credit Agencies of Islamic countries sponsored by the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) was held in Jeddah, Saudi Arabia on 4th & 5th November 2001. Export Credit Guarantee Agency was invited by ICIEC and participated in the meeting. It covered a number of areas including cooperation among ECAs members, exchanges of technical information, improvement and exchanges of experience on buyers, training, information technology, debt collection, and reinsurance. Mr. Nasir bin Issa Al Ismaily of ECGA chaired the session on Reinsurance of Credit and Political Risks. Mr. Michael McPhilimey an independent consultant delivered presentation on reinsurance including the technical and managerial prerequisite for obtaining reinsurance by ECAs in the international market.


Questions and Answers 

Q- Why does Export Credit Guarantee Agency issue pre-shipment credit guarantees on behalf of credit insured exporters to commercial banks?
A- The Agency issues pre-shipment credit guarantee to commercial banks in order to assist the exporters in obtaining pre-shipment financing for the purpose of purchasing raw materials, processing/manufacturing and packing of goods to be exported. The guarantee fills the security gap needed especially for small sized exporters who are in need of such financing but lack necessary collateral.

Q- How does the Export Credit Policy help to raisefinancing?
A- The Export Credit Policy is normally recognized by the commercial banks as a valuable form of an additional security. If necessary the exporter can assign the benefits of the policy to his financing bank which allows ECGA to pay claims directly to the Bank. In consequence the credit insured exporter can expect to enjoy improved financial facilities and in many cases through relatively lower interest rates.

Q- How does ECGA underwrite short-term business to exporters?
A- ECGA underwrites short-term business on a comprehensive basis by issuing Standard Export Credit Policy under which individual buyers are then normally underwritten subject to individual credit limits, which are usually valid for more than one shipment or contract. ECGA underwrites each individual buyer after assessing the buyer’s credit worthiness and risk.

Q- What should I as a credit insured exporter pay attention to when I receive ECGA's credit limit approval ?
A- You should ensure that the approved buyer whose name and address is shown on the credit limit is the same party with which you have entered into the contract of sales. A slight variation in the name of a company can mean another separate legal entity. Should you wish to trade with the buyer's parent or associate or subsidiary companies, it is necessary for you to send in separate Credit Limit Application (CLA) since members of the buyer's group of companies are different legal entities. You should also pay particular attention to the amount, the payment terms, the expiry date (if any) as well as any specific conditions shown on it, e.g. the credit limit covers specific shipment only or you must report overdues to ECGA immediately or any other endorsement attached to the credit limit approval.

Q- How does ECGA set the credit limits?
A- ECGA has access to various sources of information on the financial standing of millions overseas buyers. The sources of information vary. In some cases it is accessed on-line within seconds through its international contacts. In others it may take a number of days. Thus the credit information report received on the buyer as well as any trading experience the exporter can provide enables ECGA to set the credit limit accordingly.

Q- How does ECGA perceive a potential loss situation?
A- The Agency recognizesoccurrence of such situation when payments are overdue or when credit insuredexporter has any reasons to expect payment problems. Thus the insured is required under the ExportCredit Policy to notify ECGA especially when such payments are overdue. In its part, ECGA will then categorize theexposure as a potential loss, even if claims have not yet beenpaid.

Q- What is the credit risk and why it is necessary to insure it with ECGA?
A- Itis the risk that the insured will be unable to recover all or part of thereceivable due to the occurrence of a cause of loss.ECGAcredit limits stipulate for each overseas buyer the maximum amount that theexporter may have outstanding at any one time for goods dispatched. Itis necessary to mitigate such risk through export credit insurance. The Export Credit Policy of ECGA will minimizes the risk of non-paymentdue to both commercial and non commercial or political risks.

Q- What risks are off cover by ECGA?
A- ECGA will not cover disputes between the buyer and the exporter regarding the supply e.g. quantity, quality, packing, etc, unless the policyholder gets a court ruling in his favor in buyer’s country. Also it does not cover causes inherent in the nature of goods, default of any agent of the exporter or of the collecting bank, and fluctuation in the exchange rate.

Q- What action as policyholder should take when recoveries are received from the buyer?
A- All proceeds of recovery action must be remitted in full promptly to ECGA for allocation. It will then allocate them in the proportion in which the original loss was shared and pay you your share.

Q- Are credit limits issued to buyers by ECGA supersede earlier limits?
A- Credit limits issued by ECGA usually supersede all earlier limits but do not necessarily invalidate them. At Date of Ascertainment of Losses only one is judged applicable.

Q- What type of sales contracts are eligible for ECGA cover ?
A- Under the Export Credit Insurance Policy cover is available for shipment under contracts for export of goods on payment terms of Cash Against Document, Documentary Sight Draft, Documents against Payment (D/P), Documents Against Acceptance (D/A), Open Accounts and Letters of Credit at Sight or Usance. However, if the terms of payments are different to those in the original contract for instance from L/C to D/P terms and from D/P terms to D/A terms the policyholder is advised to obtain the buyer's prior consent in writing before shipment. Otherwise ECGA may not be liable even if the policyholder already has a credit limit on that buyer .

Q- What is theBank Assignment Letter?
A- It is the transfer of rights and / obligations under a contract from the credit insured exporter by ECGA to his bank. Thus the exporter assigns the benefits of Export Credit Policy it has obtained from ECGA in favor of his bank as security for financing. Hence in case of payment of claim, the Agency will pay directly to the exporter’s bank in view of his authorization as per the signed assignment letter also known as Letter of Authority (L/A).

Q- What actions does ECGA suggest to the exporter to minimize losses in the case of repudiation of the goods by the buyer?
A- In the case of repudiation, the exporter should first arrange proper storage and provide commercial insurance for the goods involved. Then he should send a written demand to the buyer to take delivery of and pay for the goods within a certain time limit. If such action fails, he should look for an alternative buyer and hold the original buyer responsible for any losses incurred. The exporter should always promptly inform ECGA of his actions.

Q- When should a claim be submitted?
A- A claim should be submitted as soon as it becomes clear that your efforts to minimize loss have been exhausted. Take a potential buyer default, for example. Assuming that your buyer had not paid on 'due date' and that you had spent, say, six months in chasing action (in consultation with ECGA following notification of a probable loss), you would be justified in assuming that your probable loss had turned into a fairly certain one and that a formal claim was now called for. Were the submission of your claim to be delayed much longer there would be a danger that ECGA would not be given sufficient time to examine and process the claim and to settle it at the earliest date permissible under the terms of the Guarantee.

Q-What is the commercial risk and what are the causes of losses being covered under such risk by ECGA?
A- It is the risk of deterioration in the financial situation of a private buyer, resulting in default or insolvency or non-acceptance of goods by the buyer. These causes of commercial risk are covered by the credit insurance of the Export Credit Guarantee Agency.

 
Tips to Exporters

  Default in payment and repudiation of goods are the first two of the three main causes of losses covered under the export credit insurance scheme of ECGA. The third being bankruptcy that is when the buyer become insolvent.

  Continuousvigorous recovery action by the exporter to the buyer prior and after payment ofclaim by ECGA is the best option than write off any amount of overduedebt.

  As an exporter insured by ECGA, you should not ignore warning signs of a bad debt to the buyer.

By insuring your export business with ECGA, the policy provides necessary protection from protracted default, non-acceptance of the goods as well as insolvency of the buyer as well as non-commercial risks.

Export Credit Insurance is clearly one of today’s greatest hidden keys to global growth and success.


The ability of exporters to offer aggressive open credit terms can enhance the exporters ability to meet a customer’s needs. As competition in the global marketplace heats up, more and more companies are demanding open credit. By utilizing credit insurance to hedge the risk of loss, exporters can extend open credit to buyers, which may make the difference between securing the contract and losing the sale.

The keys to business success rest largely in the hands of the credit decision-maker. And, the door to success won’t open without them. What are four keys of such success?

Key 1 - Gathering as much information as possible on the prospective Buyer before a sale is made .

Key 2 - Careful analysis of the available information in order to make an informed and prudent credit decision.

Key 3 - Setting a judicious and appropriate credit limit.

Key 4 - Continue to monitor the customer’s creditworthiness.

   
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