Ghana Exim Bank: The hope for trade finance and economic growth (Final)
Under the newly established Exim Bank, Export Credit Guarantee Schemes shall be put in place around the world to mitigate anticipated risk and enhance the opportunities available to exporting companies in accessing credit. Following from this, most exporters will be able to have access to institutional credit to pre-finance their exports.
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The presence of EXIM Bank is going to help with accessibility of Export Finance through pre-shipment and post-shipment financing. In the case of pre-shipment financing, the Bank can provide exporters with financing for the purchase, processing or packaging of goods on the basis of a confirmed export order received in the exporter’s favour from an overseas importer.
With post shipping, the Bank will provide finance for export goods from the stage of shipment to the date of realization of the export proceeds. The issues of exporters who sell goods abroad and usually have to wait for some time before receiving payment from overseas buyers will now get some relief.
The Export Credit Insurance Scheme of EXIM Bank in Ghana will provide exporters of goods and services with a significant degree of financial security that will allow companies to pursue bolder export policies by accepting new purchasers and entering into new overseas markets due to a smaller impact from the risks of non-payment. The implementation of the above alongside other strategies by EXIM Bank will improve export trade and stimulate economic development in Ghana.
Way forward
For the Bank to achieve its objectives, the government has to take a bold policy decision to make use of the National Export Strategy for the non-traditional sector (NTE) to provide the strategic direction for mobilizing and refocusing national efforts to achieve substantial export growth and diversification. This will ensure widespread shared economic benefits, especially reduction of poverty and spatial inequalities. Exports have the ability to contribute significantly to GDP growth, spread economic benefit and reduce high cost associated with import.
In the use of Designated Financial Institutions, (DFI’s) in the case of EDAIF, it is suggested, should not be abolished, but rather work in partnership with the EXIM Bank to ensure easily access to the credit facilities. The EXIM Bank through its Credit Guarantee Division should encourage other banks in the country to provide financing to the export sector in designated products and services and at agreed rates of interest and then apply to the EXIM Bank for refinancing.
Essentially, the EXIM Bank should also aim at providing Ghanaian companies with suppliers credit support to enable them penetrate the West African market with their products. Where possible Buyers’ financing (direct loans) should also be considered to importers from the West Africa region.
Trade policy occupies a unique place among other policy domains in shaping the environment in which companies establish and operate their businesses. Whether, for example, local industries are protected or are left to the mercy of severe and unfair competition is attributed to trade policy. Therefore, in order to maximize synergies between policies and strategy, trade policy should not only work in tandem with the export strategy; it must stress it to permit trade and export to play their efficient role as an engine of economic growth.
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As a quasi-governmental institution, the Ghana EXIM Bank must act as an intermediary between government and exporters for export financing. Like other countries that already have EXIM Banks, it would be able to assist our exporters to compete internationally by providing credit insurance guarantee and finance facilities to support their overseas contracts. In addition, government should establish an efficient and effective single window system to enable exporters and shippers to submit their documentations at a single location. This will go a long way to reducing the time and cost of doing business at the port and harbors.
International trade partnerships
The EXIM Bank must take advantage of international trading partnerships, such as the African Growth and Opportunity Act (AGOA) of the United States of America and ensure the smooth implementation of four key elements which will guarantee a successful trade facilitation process. These include:
• a strong political will
• a clear strategic plan
• a close cooperation with the business community, and
• a well-funded and long-term technical assistance programme
Again, it is equally important that government develops a distinct or well-defined framework for implementing the country’s industrial policy and development agenda. Generally, the industrial policy is aimed at ensuring that industrialists are able to offer high quality and competitive products to enable them gain access to the global market. It is also prudent as a country to embark on export diversification which will see a remarkable change in the composition of a country’s existing export product mix. This has the propensity to lower instability in export earnings, expand export revenues, add value and enhance growth.
Government should provide financial support to increase the institutional capacity of export service agencies such as Ghana Export Promotion Authority (GEPA), Ghana Standard Authority ((GSA) Ghana Shippers Authority, (GSA) and Private Export Associations and Federations.
Similarly, it should be prudent to provide reliable utility services such as energy and water supply, particularly to those within the Free Zone enclave. The government must endeavor to restructure the existing export incentives schemes such as Custom Duty Drawback, Corporate Tax Rebate, Export Proceeds, Retention scheme, and Up-Front Duty Exemption duty drawbacks are active a
nd working efficiently to benefit exporters and the country at large.
The Government, policy decision makers and stakeholders are confident that the establishment of the Ghana EXIM Bank will provide the country with the relevant window of opportunity to correctly exploit export potentials under international trade agreements such as Africa Growth and Opportunity Act (AGOA) and the Economic Partnership Agreements (EPAs) which local businesses are struggling to utilize due to the lack of capital to expand and meet the necessary export requirements.