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Export Credit Agency (ECA)
Practical Law Glossary Item 2-500-3115 (Approx. 2 pages)
Glossary
Export Credit Agency (ECA)
Private or quasi-governmental institutions that provide financial support (such as insurance, loans, or guarantees) to promote the trade and export of the goods and services of their host country. Examples of ECAs include the Export-Import Bank of the United States, the Export Credits Guarantee Department (a department of the UK Treasury), and Compagnie Francaise d' Assurance pour le Commerce Exterieur (France).
Export-import financial support may be structured as:
- Direct lending: loans to borrowers that are conditioned on the purchase of goods and services from businesses organized in the ECA's jurisdiction.
- Intermediary lending: also known as on-lending, the ECA loans funds to an intermediary which then makes loans to the project company.
- Interest rate equalization: a commercial lender makes loans to the borrower at below market rates and the ECA compensates the lender for the difference between that rate and the rate at which the lender could have made the loans.
- Credit insurance: the ECA provides political risk insurance for loans made by private sector lenders.
- Guarantees: these guarantees lower the risk of a transaction and allow lenders to enter into financings which might otherwise not be possible due to credit or jurisdictional issues. ECAs may guarantee a loan made to an exporter in order to facilitate exports.
For more information on ECAs, see Practice Note, Project Finance: Sources of Available Financing.