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Trade at ease with Export Credit

An export credit agency offers trade finance and other services to facilitate domestic companies' international exports. Most countries have ECAs that provide loans, loan guarantees and insurance to help eliminate the uncertainty of exporting to other countries. Export Credit Agencies (ECAs) help finance exports by providing direct credit, credit guarantees, or credit insurances. Direct credit may be provided either to the exporting firm (allowing them to supply goods on credit) or to the importing firm (allowing them to buy goods with cash).

Different Types of Export Credit- Making export smoothly

  • Pre-shipment export finance.
  • Post shipment export finance.
  • Export finance against collection of bills.
  • Deferred export finance.
  • Export finance against allowances and subsidies.
Export credit agencies offer loans, loan guarantees and insurance to help domestic companies limit the risk of selling goods and services in overseas markets. ECAs can be government agencies or private lenders, or semi-government bodies.

Advantage - Export Credit
Export credit insurance can not only help exporters grow their international sales, but also allow empower them to better manage their business. Expand into new markets confidently knowing that - should a foreign customer default - your business will be compensated up to 95 percent of your foreign invoice.
Export credit insurance protects a seller from the risk of nonpayment by a foreign buyer. The insurance usually covers commercial risks such as buyer insolvency, bankruptcy, or default.
Balance of Payments BPO - The BoP consists of three main components - current account, capital account, and financial account. As mentioned earlier, the BoP should be zero. The current account must balance with the combined capital and financial accounts.

Difference between Balance of Trade BOT & Balance of Payment BOP -
BOT is a statement that records a country's imports and exports of goods with other countries in a period. Whereas BOP records all the economic transactions performed by that country within a period. A major difference between BOP and BOT is regarding the records they keep.

Why is balance of payment Zero?
The sum of all transactions recorded in the balance of payments must be zero, as long as the capital account is defined broadly. The reason is that every credit appearing in the current account has a corresponding debit in the capital account, and vice-versa.

What is basic balance?
Basic balance is an economic measure for the balance of payments that combines the current account and capital account balances. The current account shows the net amount of a country's income if it is in surplus, or spending if it is in deficit. The capital account records the net change in ownership of foreign assets.

Key terms - Export Credit
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