Diversity and adversity

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01 November 2005

Export credit agency involvement in large infrastructure projects is not just about backing exporters and protecting jobs in the home country. In the Middle East borrowers are turning to ECAs as key sources of finance in a region keen to diversify its funding base. Oliver O'Connell explores the reasons behind the increasing use of ECA and structured trade finance and how banks are competing to win deals.

The nature of financing in the Middle East North African (MENA) region is changing and sharper trade structures are back big time. To finance the sheer number of infrastructure projects in the Middle East, project sponsors are increasingly looking at ways to diversify sources of funding. Export credit agency (ECA) involvement is one way of attracting additional liquidity. The Middle East has not historically been a big user of ECA finance; however there are two instances where it can be of use. The first is for financing niche products, for example some governments use ECA finance for defence purchases as a more discreet way of raising finance than going out to the capital markets for borrowing needs. The second instance where ECA finance is used is when structuring larger and more difficult projects where the presence of an ECA provides comfort to international lenders. In response...

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