Export credit guarantee is a scheme provided to safeguard export financing banks against losses resulting from the export transaction they finance. The scheme is a vehicle to facilitate exporters’ access to bank credit and enables local exporters not to lose an export market due to inability to get bank credit. It enables national exporters to compete on equal footing with other exporters in increasingly competitive foreign markets.
Previously, the National Bank of Ethiopia had been handling the scheme until it is transferred to Development Bank of Ethiopia from February 1, 2007 onwards. During the start of operation at DBE, the Branch operation and project management department was responsible for handling the operations of the scheme. Later on, as of August 2008, Export Credit Guarantee and Special Fund Administration Bureau (ECGSF) start to undertake the responsibility.
Process and eligibility requirements
Local exporters, those engaged in non-coffee export, lodge their pre- or post-shipment loan application to any licensed commercial banks operating in Ethiopia. These commercial banks appraise the export business with their applicable credit policy and procedures. Upon the written request of a financing bank, the guarantor, DBE, issues letter of guarantee to cover 80% of the outstanding loan balance and interest thereof when the project is found within acceptable risk level of DBE.
The guarantee period is up to 365 days to cover pre-shipment export loan extended to exporters and post-shipment guarantee period may extend up to 180 days.
Exporters shall satisfy all of the following in order to be considered eligible for export credit guarantee
- The export project to be financed under ECG scheme shall be bankable;
Exporters shall not carry ‘loss’ category loans;
Exporters Shall present bona-fide purchase order from foreign buyer;
- xporters Shall produce evidence of a valid investment certificate and/or trade license
New exporters, those engaged in export business for less than 12 months at time of applying, shall produce property or other collateral
New producer-exporters shall produce a collateral equivalent to at least 40% of the amount of the loan requested.
Other new exporters shall produce property or other collateral equivalent to at least 50% of the amount of the loan requested.
Both (Producer/other new exporters) shall produce evidence that all proceeds from non-perishable goods to be exported shall be paid through irrevocable letter of credit.
Existing exporters, those who have been engaged in export business for at least 12 months prior to the date of application, shall produce from local banks documentary evidence about receipt of export proceeds in the 12 months preceding the date of application for export credit guarantee.
The following are the necessary Documents/attachments to be fulfilled for export credit guarantee
Fully completed ECG application format by the financing bank
Copy (ies) of complete loan approval form (LAF) prepared by the financing bank (including related annexes)
Export credit guarantee request application cover letter written by financing bank addressed to the DBE.
Copy of exporter’s (borrower’s) application letter for export credit filed with financing bank.
Copy of business license
Copy (ies) of valid purchase order from foreign buyer(s)
Copies of export proceeds tickets evidencing export receipts over the recent 12 months prior to the application date
Copies of recent financial statements of the borrowing company
Exporter’s letter of declaration stating that all information provided and documents submitted to the financing bank are correct and true to the best knowledge of the borrower.
Credit information of the client (CIC) obtained from NBE data base within less than 1 month period of application for DBE’s Export Credit Guarantee.
Written documents that shows the applicants credit discipline