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The Sri Lanka Export Credit Insurance Corporation (SLECIC) launched a new product SLECIC Export Finance which aims at providing direct finance for low and medium term exporters at a post shipment stage.

This product is expected to provide for the immediate encashment of export bills which will enable the exporters to proceed with the preparation of their next export order. It would not burden them with the uncertainty and delays that arise when waiting for the proceeds of one export order to commence the preparation of the next one.

It also aims at providing funding for those exporters who lack the collateral to pledge to a lending institution to obtain the necessary finance. Yet another area of benefit would be the providing of reasonably rated funds to exporters to enable them to be competitive in overseas markets with the resulting lower cost of production.

"The need to increase exports is today more pronounced than ever from the viewpoint of the country. It is necessary to improve our balance of payments by countermanding an ever increasing import portfolio, it is necessary to improve our flagging foreign exchange reserves and it is necessary to reduce our staggering foreign debt. It should be in fact the wish of all patriotic citizens to support any effort to promote exports in Sri Lanka. As a corporate citizen more as a patriotic corporate citizen SLECIC has embraced the need of the country to promote and develop exports," SLECIC Banking Consultant Ananda Liyanage said.

An exporter in the ordinary course of the business receives trade inquires from overseas buyers. If the exports of the country are to increase and diversify then these trade inquires must be followed. If not there is no hope for the country to expand and diversify its exports. However these exporters require answers to 3 key questions prior to proceeding with such inquires if they are to act with firmness and vigour rather than reckless abandonment. These questions are:

* Do the prospective buyers have a proven track record of honouring their overseas commitments or are they known defaulters?

* Is it possible to raise working capital both at pre and post shipment stages from financial institutions for the increase in the production capacity with the available collateral?

* Would it be possible to be competitive in the overseas markets taking into account among other things the cost of financing?

The aim of SLECIC is to assist low and medium level exporters to meet these challenges and emerge successful. Towards fulfilling this objective SLECIC has already provided or will thrive to provide the following services:

* Biz Info a product launched by SLECIC in August, 2002 to sell status reports on buyers obtained from reputed international agencies to lending institutions would be used to evaluate the rating of overseas buyers and overseas banks. It would be necessary to rate buyers when the payment obligation rests solely with the buyer when trading under Documentary Collection terms and rate the buyers bank when the payment obligation rest with the bank when trading on Documentary Credit Terms.

* The Export Payment Insurance Policy (EPIP) has been in the product line up of SLECIC since its inception. It covers the commercial risk and country risk of the transaction. The former category covers the bankruptcy or insolvency of the buyer. It also covers protracted default and repudiation of contract. In the latter category the EPIP covers risks associated with import and foreign exchange restrictions as well as war and civil commotions. The EPIP therefore evaluate the risks that the exporter has to face when dealing on documentary collection terms. When the exporter deals on documentary credit terms the commercial risk would depend on the strength of the issuing bank.

SLECIC hopes to evaluate these risks faced by exporters and provide financing at a post shipment level and improve the cash flow requirements of the exporter, which would not be subject to stringent collateral requirements. It would however be subject to the requirement of being an EPIP holder.

* Being a Governmental Institution established for the promotion of export of the country naturally provides SLECIC accessibility to low cost funds. In turn these funds would be lend to exporter at reasonable rate to ensure their competitiveness in overseas markets. This would not only enable existing exporters to increase their market share but make it possible for new exporters to enter these overseas markets.

"SLECIC believes that this new product will counter much of the fears for exporters in accepting new markets for their products".

"This would mean the increase of the countries export volumes in the future. It is the earnest hope of SLECIC that it would find partners rather than stand isolated in its endeavours to upgrade the export sector of the country," Liyanage said.

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