Domestic Credit Insurance can boost credit sales: ECGC

Domestic Credit Insurance can boost credit sales: ECGC


HARARE, Local manufacturing companies have potential to boost sales locally through the Domestic Credit Insurance offered by the Export Credit Guarantee Corporation (PVT) Ltd, (ECGC) which enables companies to sell on credit.

As a result of increased defaults, several companies adopted cash selling models, restricting credit facilities to as minimum as 10%.

“Domestic Credit Insurance is cover issued to companies who sell their products locally on credit to protect them against default by their local buyers. Just like the export credit insurance it increases the company’s sales as it is able to sell to a number of buyers on credit,” said ECGC managing Sekai Chirume in emailed responses.

ECGC is a wholly owned subsidiary of the Reserve Bank of Zimbabwe and is a duly registered short term insurer. It was incorporated in 1999 and commenced operations in 2000. Its primary objective is to promote the growth and diversification of Zimbabwe’s export trade through the provision of financial services that address the needs of this sector. The company aims to achieve this objective by providing credit insurance and guarantee services in a manner that enables exporters to manage payment related risks and obtain sufficient credit from banks to meet export orders beyond the limitations of the collateral security available to them.

Provision of these services, which are generally available to exporters in competitor countries, will level the playing field for Zimbabwean exporters and enable them to compete much more effectively in export markets. Banks will be able to use the guarantee scheme to manage their lending risk to exporters, while the insurance programme will enable exporters to manage buyer/payment risk.

Chirume said the country does offer a level playground for insurance as the policies on offer and accompanying benefits compete well with those on the international market.

“With respect to ECGC we are a member of the Berne Union/Prague Club which is grouping of export credit agencies worldwide and as such we are exposed to the current trends in international credit risk underwriting,” she said.

Meanwhile, she on other hand said while uptake of the Export Credit Insurance Policy has been low, anticipated increases in exports is expected to drive uptake.

“Of late there has been a positive uptake of the policy in line with an anticipated increase in export performance.  It is important to note that the major exports such as gold and platinum are uninsurable hence the focus for the policy is mainly the manufacturing and horticulture sectors,” she said.

Government, in particular through the Central Bank has been emphasising on need to increase export receipts in order to generate more foreign currency.

Exports increased to $3.5billion in 2017 but the country still recorded a trade deficit of $1.4billion, a situation which calls for concerted efforts to enhance export performance.