DUBAI, Massimo Falcioni, CEO of Etihad Credit Insurance (ECI), has affirmed that the company – since its establishment in 2018 – is instrumental in achieving the target adopted in the UAE National Agenda for non-oil Export Development, aiming at accessing 25 new global markets and advance the company’s foreign trade, thanks to ECI’s partnership strategy with foreign governments’ Export Credit Agencies and extensive Database of more than 320 million companies worldwide.
In an interview with the Emirates News Agency (WAM), Falcioni said, “We implement our strategy to shape the UAE economy in accordance with the vision of the UAE leadership for the next 50 years. We seek to protect AED10 billion worth of non-oil trade by the end of 2021 and AED27 billion by 2024.
As the UAE Federal export credit company, Etihad Credit Insurance will continue to protect businesses’ cash flows and ease SMEs’ access to trade finance, thereby improving their contribution of the industrial sector to the UAE economy, he added. “Our trade credit solutions create new opportunities for investments and project financing, thereby adding value to the UAE’s non-oil GDP, employment, and SME sector development.”
The ease of access to such trade and project financing and other services that we provide will add to the success of path-breaking initiatives by the UAE government “Operation 300bn” and “Make it in the Emirates”, which aim to more than double the value of the output of the national manufacturing and industrial sector in the next 10 years.
Etihad Credit Insurance also aims to strengthen the position of the UAE as a global leader in creating sustainable cities and addressing global warming. Among the ways Etihad Credit Insurance mirrors its strong resolve to creating sustainable cities, for one, is the organisation’s partnership with Masdar, Abu Dhabi Future Energy Company, to work on initiatives aimed at supporting investment in renewable energy projects that will contribute to reducing carbon emissions and accelerate the energy transition.
He explained, “Our contribution to the growth of the energy and sustainability sector comes in line with the country’s ‘Energy Strategy 2050’, which aims to allocate over AED600 billion to meet its goal of increasing the contribution of clean energy sources in the total capacity mix to 50 percent (44 percent renewable and 6 percent nuclear) by 2050.”
When asked about the achievement of the company in the export sector, Falcioni stated the ECI had been on a mission to accelerate economic diversification policies and reduce the dependence on oil resources as a source of income in preparation for the inevitable post-oil era.
“We assisted companies licensed in the UAE to export their goods, services and projects covering either the Short Terms credit payments protection than the Medium/Long Term guarantees to reduce the costs of projects funding,” he noted.
As of August 2021, Etihad Credit Insurance issued 5,235 revolving credit guarantees to sustain the UAE non-oil trade for a total exposure amount of AED3.1 billion, equivalent to AED9.3 billion insured non-oil export, of which 50 percent (AED4 billion) is UAE non-oil export.
These guarantees were offered to companies active in 18 sectors, including Chemicals (22 percent of the total value), Metal and Steel (12 percent), Cables (20 percent), Building Material (7 percent), Packaging (6 percent), Automotive (5 percent), Automobile (4 percent), Construction (4 percent), Utilities (4 percent), Food (6 percent) and others, exporting to 83 countries, including KSA, Iraq, Oman, India, Kuwait, Jordan, Egypt, South Africa, UK, Hong Kong, France and many others.
“Our trade credit insurance helped clients during COVID-19 pandemic get substantial recovery from their buyers’ inability to honour their obligations,” he said. Etihad Credit Insurance also offers financial support to domestic companies’ international export activities through its large ecosystem of strategic partners, including local and international banks. These partners could offer loans at concessional rates, guaranteed by ECI, to secure the funding of the supply chain and help companies compete in international markets.
Etihad Credit Insurance also provided guarantees to finance UAE Manufacturers for Export Finance (Pre and Post Shipments), Discount Receivables (loss payee/factoring) and Supply Financing for AED1.1 billion, of which 87 percent (AED960 million) to UAE exporters. Etihad Credit Insurance was also active in supporting projects financing abroad, which use UAE products and services, providing guarantees for AED 140 million.
Regarding ECI’s support to the growth of SMEs, Falcioni said that SMEs are the strategic drivers of industries across the UAE and are expected to play a much more decisive role in the coming years. “According to the UAE Ministry of Economy, more than 94 percent of the companies operating in the UAE are SMEs, and together, they account for more than 86percent of the total private sector workforce and around 60 percent of the country’s current GDP.”
He stated, “SMEs’ delicate lifespan is why they are considered high-risk by financial institutions, leading them to have difficulty getting access to credit,” adding that “As per the data released by the US Bureau of Labour Statistics, just 50 percent of start-ups make it to the fifth year of operation, and this drops to 33 percent in the 10th year.”
One of the most difficult challenges SMEs currently face is the economic slowdown caused by the pandemic, which may make it hard for businesses to maintain cash flows. Policy actions and stimulus packages provided by the respective governments and central banks can help SMEs recover to a great extent.
“That is why 28 percent of the guarantees issued by Etihad Credit Insurance were allocated to SMEs. In 2020, we issued AED420 million worth of trade credit support to the UAE SMEs, which translates to AED1 billion non-oil trade insured turnover.
The guarantees helped protect the liquidity of SMEs amidst this challenging economic cycle, assisting businesses in reducing their cost of bank funding and allowing them to request their preferred bank to discount the invoices at a preferential rate.
In 2019, Etihad Credit Insurance launched ‘SME Protect’, a digital trade credit solution specifically designed for UAE-based SMEs to support their growth plans globally and assist them in entering high-growth markets. It aims to broaden businesses’ understanding of trade credit solutions and expand their export business safely. By providing guarantees to receivables, this innovative solution enables SMEs to provide credit to clients without financial loss.
Asked about how did ECI support SMEs in entering the export market, Falcioni said, “Managing cash flow and delayed non-payments is the biggest challenge among small businesses worldwide. The situation is not different in the UAE, where SME’s make up 95 percent of the total enterprise population. Debt collection continues to be a challenge for companies. While securing timely payment from clients and customers is critical for businesses of all sizes, non-payment or late payment can be especially challenging for SMEs that may lack the free cash flow or finance facilities larger companies can draw on to manage short-term issues.
Most SMEs still rely on letters of credit and cash payments instead of selling on credit. Changing this scenario with easy access to trade and project finance and credit insurance can drastically help them hold out against the economic headwinds.”
He concluded by saying that the launch of our SME Protect could end this enduring problem for small enterprises to a great extent. This solution helps instill confidence within UAE-based SMEs to enter highly competitive markets and increase their global presence by securing receivables and mitigating credit risks.
Source: Emirates News Agency
