To understand what export financing means, let's start with the definition given below:
An export financing consists in setting up a medium to long term credit for the financing of an infrastructure project carried out abroad, for example by a French exporter.
To be concrete, we can evoke here for example, the financing of a project of putting in service of new water pipes in a developing country to prevent various diseases, of an amount of 50 million US dollars over 12 years
Players in export financing
The different actors involved in export financing are the following:
- the large international banks that will set up the financing (in France, Societe Generale, BNPP, etc.)
- exporters who carry out the project on site (in France, Bouygues, Vinci, Saint-Gobain, etc.).
- export credit agencies, such as BPI France Assurance Export, which limit country risks (war, revolution, etc.) and counterparty risks (payment default) for large international banks.
- borrowers who are often public entities (e.g. Ministry of Health in the case of the installation of new water pipes).
What kind of export financing?
Two financing solutions are essentially proposed, namely:
- buyer's credit, which will finance the exported part (as opposed to the part carried out locally by a workforce residing on site), which corresponds more precisely to the export of original capital goods.
It should be noted that this buyer's credit is guaranteed by the export credit agency in the event of default by the borrower with, as indicated above, political and/or commercial risk coverage of 95 to 100% of the credit amount. To give an idea, the duration of the buyer credit is about 12 years.
- The related financial credit, which will finance the part carried out locally by a workforce residing on the spot, which cannot be financed by the buyer credit. It should be noted that this credit is not provided by an export credit agency, which is not its vocation. Indeed, as a relay of the State, the export credit agency intervenes to allow national companies to win new markets, synonymous with jobs in the exporter's country. They therefore have a duration (7 years to give an order of magnitude), in principle lower than that of the buyer credit.