Role of Short-Term Export Credit Insurance to Exporters and Banks by ECGC in facilitating Exports from India

A key risk faced by exporters in the Indian economy is the risk of default in payment by foreign buyers. On the other hand, commercial banks have to bear the risks in lending credit to exporters. ECGC covers both these risks and charges premium in return to foster exports in the Indian economy. ECGC’s role in providing export credit insurance to banks (ECIB) is as important as that in insuring the exporters against non-payment by foreign buyers. In this context, this study, is a comprehensive assessment of the role of ECGC in furnishing short-term export credit insurance (ECI) to exporters and to banks with a view to boosting the export performance of exporters while simultaneously expanding its own business. The methodology of the study consisted of two phases of research. The first phase comprised of (i) Desk Research, (ii) Focus Group Discussions (FGD) with ECGC officials, (iii) Database Development, (iv) Designing of Survey Instrument, (v) Pilot Testing. The second phase was dedicated mainly to a Primary Survey of 103 ECGC policy holding exporters, 100 non-policy holding exporters and 78 banks. A key risk faced by exporters in the Indian economy is the risk of default in payment by foreign buyers. On the other hand, commercial banks have to bear the risks in lending credit to exporters. ECGC covers both these risks and charges premium in return to foster exports in the Indian economy. ECGC’s role in providing export credit insurance to banks (ECIB) is as important as that in insuring the exporters against non-payment by foreign buyers. In this context, this study, is a comprehensive assessment of the role of ECGC in furnishing short-term export credit insurance (ECI) to exporters and to banks with a view to boosting the export performance of exporters while simultaneously expanding its own business. The methodology of the study consisted of two phases of research. The first phase comprised of (i) Desk Research, (ii) Focus Group Discussions (FGD) with ECGC officials, (iii) Database Development, (iv) Designing of Survey Instrument, (v) Pilot Testing. The second phase was dedicated mainly to a Primary Survey of 103 ECGC policy holding exporters, 100 non-policy holding exporters and 78 banks.The primary survey of the exporters identifies the key factors considered important for ECGC policy adoption as including geographical differences among places of origin of exports, pressure from international competition and characteristics of the product. Moreover, policyholder exporters have reportedly performed relatively better than non-policyholder exporters in terms of both average domestic and export sales. To increase ECGC policy adoption among exporters, removing procedural obstacles to ensure faster approvals and smoother claims settlement emerged as the topmost suggestion. Other important suggestions include introducing flexible premium rates and discounts, expanding credit limits, removing restrictions on coverage of risky destination markets and expanding credit limits. The primary survey of banks identified the most important factors which motivated them to take an ECGC cover as protracted default of the exporter followed by insolvency of exporters. On the other hand, the key reasons for low adoption of ECGC policies among banks have been found to be lack of funds, procedural obstacles and unavailability of the features of the cover specifically desired by the banks. The key suggestions for ECGC Limited to improve the reach and use of its policies to increase its ECIB business are similar to those for enhancing policy adoption among exporters. These include faster approval, smoother process of claim settlement, reducing the premium amount, increasing the risk cover, raising awareness of its policies by providing relevant information through online and offline channels and introducing customized policies for the banks