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An export credit agency is a finance institution which offers finance to domestic companies for international export operations and other trade related activities. ECAs provide companies with loans and insurance to help them in eliminating the uncertainty involved while exporting to other countries.
ECAs also cover the political as well as commercial risks involved in overseas investments. They encourage and support export activities and international trade when other finance providers fails to provide funding. There's no specific model for an export credit agency. Some export trade agencies operate from government departments, whereas others operate as private companies.
ECAs act as an intermediary amongst a nation’s government and an exporter for providing finance. Financing can take place in more than one form depending upon the exporter’s requirements.
An ECA may provide credit insurance, financial guarantees, or both depending upon the business needs. Sometimes financial guarantees are also referred to as a pure cover.
ECAs do not compete with other trade finance institutions or private banks. In fact, they help the domestic lenders in competing more effectively in international trade. In most countries, businesses and traders can access ECAs through the country’s banking institutions.
Each export credit agency is given specific guidelines by the Government outlining what support they are able to provide. This includes:
Each export credit agency is given specific guidelines by the Government outlining what support they are able to provide. This includes:
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