23.10.2000

Building Credit Insurance and Credit Information in the

Electronic Age: Rationale and Support Measures for Africa and

Mediterranean

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Rouben Indjikian, UNCTAD

Developing Credit Insurance In Africa and Mediterranean, Tunis, 23-24 October 2000

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Introduction

Africa in the the world economy, trade and financeNeed for consistent market reforms and institutional building and the desirability of export oriented strategiesWhy credit insuranceHow to start credit insurance The importance of credit informationConclusions and recommendations

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State of African economy, exports and finance

Shrinking shares in the world output and trade: The share of sub-Saharan Africa in the world GDP has shrank from 2.4%.in1980 to 1,1% in 1996. With more than 15% of the world population Africa has only 2% of the world output and exports. Moreover the bulk of African exports goes outside the continent while intra-African trade constitutes around 10 of its trade.

Lack of access to finance in spite of international initiatives on external debt reduction: cutting of the debt overhang doesn’t really improve access to the world financial markets due to the lack of adequate information and relevant institutions to assess African political and commercial risks

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State of credit insurance and credit information in Africa

State of credit insurance and reinsurance in Africa: only around 10 specialized CI/G companies including South Africa and Zimbabwe(very high level of CI coverage of exports) Morocco and Tunis (rather high) Senegal(medium), Egypt, Algeria, Nigeria (low); also some credit insurance departments in multibranch insurance companies. There are even less African reinsurers dealing with reinsurance of the policies of African credit insurers.

Nascent state of credit information in Africa: only four small companies in the whole continent are gathering credit and commercial information

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Preconditions for sustained credit insurance and credit information

Adoption of credible growth and macroeconomic stability strategy

Need for consistent market reforms and institutional building

Desirability of export oriented strategyMeasures to upgrade and diversify exports

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The opportunities of export credit insurance:

Credit insurance is still a new product for African exporters to OECD and is even less known as a means to discover new buyers and markets. They still work mainly on LC or even ICLC basis

Credit insurance as a means to secure post-shipment payments and financing

Possibilities to use credit insurance and bonding in pre-shipment financing

Credit insurance promotes exports to new markets and helps to diversify exports

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Starting export credit insurance

Starting credit insurance as a public or mixed or even private entity. Possibilities to add to the credit insurance facility also eximbank and credit information functions.The role of government. Starting from insuring exports directed mainly to OECD and other countries with available reinsurance capacities Starting credit information and access to internal and external financeSupport measures: awareness raising and pilot institutional building projects

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Credit information as a means to develop local and regional trade

Creating local credit information services as a prerequisite to start for domestic and regional credit insurance, to improve local, regional and global trade and to give access for local corporates to the internal and external sources of financing

Creating local and regional credit information networks and eventually being linked to Internet based global commercial risks information networks and sharing systems

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International support measures

The role of international organisations such as the UN, World Bank, EC, regional development institutions

The role of global industry association such as the Berne Union

The role of the Dakar Union

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Possibilities for future UNCTAD technical support : two phased

approachUNCTAD participates in international support

measures by:Undertaking awareness raising seminars and

courses for various constituencies including , policy makers, insurers and bankers and exporters from countries more apt to start credit insurance and credit information

Encouraging or playing a role of a coordinator in various initiatives and pilot projects aiming to build national or regional credit insurance and credit information facilities

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Summary of findings and recommendations

Start from OECD oriented credit insurance and then eventually go for regional and local credit insurance.

Start from credit information locally and sell information to foreigners. Eventually go for regional and global information Internet networks.

Protect traders from non payments, and collect information on local companies making them more transparent and predictable risks thus giving them better access to finance

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