Posted at 2:50 PM
After a decade as one of the fastest growing regions in the world, Africa has become a new frontier for business, and U.S. exports to sub-Saharan Africa now top $21 billion a year. Although external shocks may periodically temper growth, Africa’s long-term potential remains strong.
The Export-Import Bank of the United States (EXIM), the official export credit agency of the U.S. Government, offers a diverse range of financing solutions for U.S. exporters and African buyers to support the expansion of trade between the U.S. and sub-Saharan African countries.
Sub-Saharan Africa is a priority region for EXIM Bank. Since 2009, EXIM has provided over $6.6 billion in financing for transactions across the region. These programs increase access to working capital, protection against commercial and political risk, and offer financing on competitive terms.
For example, in May 2015, the Bank guaranteed a $73 million loan supporting the sale of 144 bridges to the Republic of Zambia. The exporter, Acrow Bridge, is a small family-owned New Jersey-based company. With the support of EXIM financing, Acrow’s competitive trade proposals were chosen over bids submitted by its European and Chinese counterparts. As a result, Acrow established a foothold in an important new market.
W.S. Darley is another example of how EXIM financing has worked for American businesses. The company manufactures fire trucks in Illinois. Darley came to EXIM when private financing proved to be unavailable. EXIM authorized a $15.7 million direct loan to support Darley’s export of 32 state-of-the-art firefighting vehicles to the government of Lagos. The company was able to support and sustain the 100 jobs at its manufacturing centers as a result.
In addition to facilitating U.S. trade finance, EXIM also provides counseling and training on how to use its programs and helps American exporters (especially small and mid-sized companies) win new business opportunities.
Here is a breakdown of EXIM Bank Products:
- Export Credit Insurance: Just like fire or theft insurance, exporters purchase credit insurance policies to eliminate risk – in this case − the risk of nonpayment by foreign customers. Depending on the market, this insurance may be difficult or prohibitively expensive for small businesses to obtain privately. So, if companies ship goods overseas and don’t get paid, they may file a claim with the Bank. We then make the U.S. exporter whole and go after the funds owed by the foreign customer.
- Working Capital Guarantees and Loans: Commercial banks are often hesitant to lend to small exporters because their receivables come from overseas and are viewed as riskier. For a fee, EXIM offers working capital loan guarantees to commercial banks. The goal is to encourage banks to lend, so growing exporters can pay workers, invest in new sales opportunities, and buy inventory, etc.
- Buyer Financing: With buyer financing, EXIM offers loan guarantees or lends directly to foreign buyers of U.S. goods and services. These products ensure that U.S. exporters don’t lose sales because their foreign competitors are coming to the table with financing from their governments (which is often the case with large capital goods exports like satellites, aircraft, power plant equipment, drilling rigs, farm equipment, and more). These EXIM products level the playing field with the 84 other export credit agencies around the world, and in the case of developing markets like sub-Saharan Africa, they also fill a private sector financing gap.
Africa’s emerging economies present rich sales opportunities for U.S. businesses – for everything from power generation, ICT and other infrastructure − to consumer goods for the continent’s growing middle class. To learn how to tap into this market and how EXIM can help, visit www.EXIM.gov.