MSME exports’ share slipped to 45.04% in FY22 compared to 49.75% in FY20 and 49.35% during FY21. Access to finance is often seen as a key bottleneck for MSMEs. Among other things, it is believed that the promotion of the Export Credit Guarantee can play an important role in improving the working capital requirement of MSMEs.
In order to support small exporters and businesses, the Export Credit Guarantee Corporation of India (ECGC) was established to promote exports from the country by providing credit risk insurance and related services for exports. It has developed several export credit risk insurance products over the years to meet the requirements of Indian exporters.
Recently, export credit provider ECGC launched a new scheme to insure up to 90% of the credit risk in export finance, supporting small exporters by encouraging banks to provide more credit amid global economic uncertainty. The risk cover, provided by banks under the Export Credit Insurance for Banks Whole Turnover Packaging Credit and Post Shipment (ECIB- WTPC & PS) is expected to enable small exporters to explore new markets and new buyers and diversify their existing product portfolio competitively.
Despite sustained efforts by the Indian government to boost MSME exports, MSME’s share in the country’s annual merchandise exports has declined. One reason for this is unawareness as people involved in the sector are not aware of government initiatives undertaken by govt to boost this sector. For example, if we talk about the ECGC program, the uptake is only around 10%, while it should be more than 50%. In this article we will discuss in detail about bout the Export Credit Guarantee Corporation of India (ECGC) scheme.
What is Export Credit Guarantee Corporation(ECGC)?
Established in 1957, ECGC is a beacon for Indian exporters, offering credit insurance covers to enhance competitiveness. It’s not just about protection; it’s about empowering businesses to explore new markets confidently.
The Corporation has launched various export credit insurance schemes to fulfill the requirements of commercial banks extending export credit. The insurance covers help the banks to adequate export credit facilities to the exporters in a time-bound manner. ECGC maintains its premium rates at the optimal level.
Why ECGC Matters For Small Exporters?
- Risk Cover: With schemes insuring up to 90% of the credit risk, ECGC provides a safety net against unforeseen events, from buyer insolvency to political upheavals.
- Access to Finance: Banks are more willing to extend credit when the risk is mitigated, easing the working capital crunch many small exporters face.
- Market Expansion: Armed with ECGC’s support, you can venture into new territories and diversify your product offerings.
Making the Most of Export Credit Guarantee Corporation:
- Choose the Right Cover: Assess your business needs and risks to select the appropriate insurance cover. Don’t hesitate to seek advice from ECGC experts.
- Stay Informed: Keep abreast of the latest schemes and premium rates. Regularly review your coverage to ensure it aligns with your evolving business needs.
- Prompt Claim Process: In case of a payment default, act swiftly to file a claim. Ensure all documentation is in order to expedite the process.
Other facilities that ECGC provides are:
- ECGC provides multiple insurance covers to Indian exporters against the risk of non-realization of export proceeds because of commercial or political risks
- ECGC provides various types of credit insurance covers to banks and other financial institutions to enable them to provide credit facilities to exporters and
- Where the buyer does not buy goods or pay for them due to disputes over the completion of the terms of the contract by the exporter or counterclaims, ECGC views the claim after the dispute between the parties is settled and the amount payable is specified, by receiving a ruling in a court of law in the country of the buyer.
Also Read: Top 15+ MSME Schemes to Empower Small Business India 2024
When Does An Exporter Become Eligible To Receive Payment Of A Claim Under The Policy?
A claim is made when any of the risks insured under the policy materializes. In case an overseas buyer goes insolvent, the exporter can make a claim one month after his loss is admitted to rank against the insolvent’s estate or after four months from the due date, whichever is earlier. For protracted default, the claim is payable after four months from the due date. Claims in respect of extra handling, transport, or insurance charges incurred by the exporter due to interruption or diversion of voyage outside India are payable after proof of loss is provided.
In other cases, the claim is payable after four months from the date of the event causing loss. However, in the case of exports to countries where long transfer delays are experienced, ECGC may extend the waiting period and claims for such shipments are payable after the deadline of such extended period.
Where the buyer does not accept goods or pay for them because of disputes over fulfilment of the terms of the contract by the exporter, counterclaims, or set-off, ECGC considers the claim after the dispute between the parties is resolved and the amount payable is established, by obtaining a decree in a court of law in the country of the buyer.
What Are The Applicable Premium Rates?
The rates of premium are determined depending upon certain factors like terms of payment, classification of the buyer’s country, and whether a shipment is covered against comprehensive risks or only political risk.
What Is The Percentage Of Cover Provided By ECGC?
ECGC usually pays nearly 90% of the loss, whether it results from commercial risks or political risks. The remaining 10% is borne by the exporter himself. Notably, ECGC reserves the right to offer a lower percentage of cover in certain cases.
Also Read: Explore RODTEP Scheme: Features and How to Avail Benefits
Empowering Small Businesses In The Export Arena: The Role of ECGC
A Delhi-based entrepreneur said on condition of anonymity, “As an exporter with 20 years of experience, I’ve witnessed firsthand the challenges and opportunities in the international trade landscape. One key lesson I’ve learned is the importance of mitigating risks, especially when it comes to payment. This is where the Export Credit Guarantee Corporation (ECGC) plays a crucial role, particularly for MSMEs looking to expand their global footprint.”
Bottom Line:
Don’t let fear of non-payment deter your global ambitions. ECGC is a tool that can provide the confidence to navigate international markets. Embrace it, but also do your homework. Understand the terms, leverage the benefits, and always be prepared for the unexpected.
In conclusion, ECGC is more than just an insurance provider; it’s a partner in your export journey. Exporters should explore how Export Credit Guarantee Corporation can fortify their business against risks and propel them towards global success.
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