Cooperation and an active approach towards stakeholders
Risk mitigation also involves active cooperation with other countries’ export credit agencies. In 2017, we carried out projects in which, together with Finnvera, export credit agencies from different countries took part in the buyer financing provided to globally operating Finnish export companies.
The Large Corporates unit continued to contact the clients of Finnish export companies and actively met both exporting clients and domestic and foreign providers of export financing in order to help Finnish exporters to conclude trade agreements. The goal is to maintain the high level of client satisfaction in the future, too.
The acceleration of small-scale export trade transactions continued with new products
Finnvera has promoted the financing of small-scale export trade transactions by concentrating on the development of trade financing instruments. In 2017, Finnvera introduced a new product, a Receivables Purchase Guarantee, to complement the Bill of Exchange Guarantee introduced to the market in the previous year. These products focus on transactions that do not exceed EUR 2 million. The Bill of Exchange Guarantee is suitable for individual capital goods transactions and the Receivables Purchase Guarantee for continuous exports with short payment terms. Both benefit exporters in that they receive the payment for the export trade transaction in cash terms when the bank discounts the bill of exchange or the accounts receivable while Finnvera carries the buyer-related credit risk.
The full potential of the new products has not yet been seen but their number and EUR amount is expected to remain rather restricted. Nevertheless, even the new trade financing products may be significant as individual trade transactions may be important for a Finnish export company.
Finnvera’s traditional trade financing products are Credit Insurance that is granted to the exporter to cover the buyer risk and the Letter of Credit Guarantee that is granted to banks.
In Letter of Credit Guarantees, Finnvera carries risks related to foreign banks that open Letters of Credit when the banks that confirm Letters of Credit need risk sharing. The leading countries in the field of Letter of Credit Guarantees were Vietnam, Algeria, Nepal and Bangladesh, Nigeria, Indonesia and Iran.
For a long time, Credit Insurance has been linked with Finnvera’s role in facilitating trade with Russia: approximately one third of the credit limits granted in 2017 were related to Russian buyers. In terms of the number of Credit Insurance arrangements, the leading countries are Russia, Turkey, Ecuador, Ukraine, Uzbekistan and Belarus.
With Credit Insurance and Letter of Credit Guarantees, Finnvera complements the private market and is mainly involved in trade with politically risky countries; private credit insurance providers and banks take care of risk-taking for industrialised Western countries.
Financing of export credits in cooperation with banks
Export credit financing facilitates the arrangement of financing for foreign customers who purchase Finnish capital goods. Banks play a key role in arranging financing for export transactions: the bank selected by the buyer provides the client with a long-term export credit on OECD terms. The bank negotiates a credit agreement that meets the terms set by Finnvera and its subsidiary Finnish Export Credit Ltd, and manages the credit. The bank transfers the export credit to Finnish Export Credit for financing. Finnvera’s Buyer Credit Guarantee is always a prerequisite for the financing.
As a new financing instrument, Finnvera concluded the first Refinancing Guarantee Scheme with the Canadian company TD Securities and the French bank Natixis in 2017. Finnvera’s Refinancing Guarantee, granted to institutional investors or credit institutions, can be used in diversifying the funding of export financing. It is an alternative method to finance export credits instead of or in addition to financing offered by Finnvera’s subsidiary Finnish Export Credit.