In the past year, Ashra has granted Israeli exporters approvals in principle for insurance of export transactions amounting to approximately $ 2.8 billion. This is according to a summary of 2021 data compiled by the Israeli Foreign Trade Risk Insurance Company. This is an increase of about 52% compared to 2020, when there was a significant slowdown in the execution of medium- and long-term transactions backed by credit insurance, against the background of the corona crisis.
Ashra notes that in light of the corona crisis, many developing countries have exacerbated economic and liquidity difficulties. These difficulties affected the ability of those countries to fund large infrastructure projects. Credit’s credit insurance allows Israeli exporters to offer these countries cheap financing packages and thus execute the implementation of these projects.
The credit insurance provided by credit is backed by a state guarantee provided by the Accountant General in the Ministry of Finance, and most requests for approvals in principle are approved by a committee headed by the Accountant General. And the provision of credit to finance large export transactions of Israeli companies, done mainly with foreign countries, and for relatively long periods of up to 15 years.
The credit says that government support for exporters, especially at a time when there is uncertainty in the markets due to the continuation of the corona crisis, is helping and supporting the return of the economy to full economic activity. This, among other things, with regard to the creation of jobs and the return of workers from the IDF to which they were expelled, following the previous corona waves.
The summary of the data shows that most of the transactions approved in 2021 were in the areas of health infrastructure, water, education and security. The volume of the average export transaction approved in the past year was about $ 72 million.
The highest level of approvals – for projects in the Dominican Republic
The highest level of approvals in principle over the past year has been for export transactions to the Dominican Republic (about $ 550 million), Azerbaijan (about $ 330 million), Paraguay (about $ 280 million) and Senegal (about $ 290 million). Other countries for which large-scale export transactions have been approved are China, Ivory Coast, Kenya and Ukraine.
Nissim Ben-Eli, CEO of Ashra: “Even in days like theirs, the main problem of many developing countries is the problem of funding. Especially these days, in light of the corona crisis, these countries are suffering more severely from the problem of liquidity and economic slowdown. “They have difficulty, and sometimes are unable, to provide long-term funding for projects in the various areas of infrastructure, even when it is clear that these projects are a catalyst for economic growth and basic livelihoods.”
Nissim Ben-Eli, CEO of Ashra / Photo: Tamar Mitzpi
According to him, the guarantee offered by the state, through credit, allows Israeli exporters to offer them cheap financing. Thus significantly increasing the ability to compete in international tenders issued by these countries and the chances of winning them: “Instead of the developing country having to borrow money itself to finance projects worth tens of millions of dollars, the Israeli exporter is the one who obtains the financing package for it, usually from banks “In these cases, the credit insurance policies backed by the State of Israel are the ultimate security for the Bank. In fact, the Bank does not price the risk of the developing country but the risk of the State of Israel and this is a very significant gap,” explains Ben-Eli. “Since the State of Israel enjoys a high ranking, the cost of financing is significantly cheaper than the financing that that country would receive in Latin America, Africa or Eastern Europe. In this way the Israeli exporter can offer the government in that country a perfect deal: “The exporter, for his part, receives the payment during the supply period and not for the duration of the loan.”
“At the same time,” says Ben-Eli, “since the long-term impact of the corona crisis on the various countries is still not entirely clear, it is our duty to carefully examine each transaction and manage the risks wisely and optimally.”