Export credit agencies to the rescue of trade finance

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25 January 2010

What saved trade from collapsing totally during the global crisis? This column argues that export credit agencies played a key role in stabilising the trade finance market, and thus helped reduce credit risks and allowed exporters to offer open account terms in competitive markets.

Source: VoxEU.orgAuthors: Jean-Pierre Chauffour Christian SaborowskiNew data on export insurance and guarantees suggest that export credit agencies (ECAs) have played an important role in preventing a complete drying up of trade finance markets during the current financial crisis. These efforts have complemented the support provided by international financial institutions and regional development banks and indicate that the call by the G20 leaders and the international community to ensure the availability of trade finance during the crisis has been largely followed through (Auboin 2009a,b).But not all countries are equipped with ECAs or similar institutions and trade finance shortages may have likely persisted in a number of developing countries, especially when they are dependent on external finance. History has shown that countries with export sectors more dependent on external finance grow significantly less than other sectors during banking crises (Iacovone and Zavacka 2009a,b). In the case of Africa, evidence seems to confirm that dependence...

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