Innovation for small and medium-sized enterprises

Up to the end of the last year, according to valid international rules, these companies could be services practically in the regime of the commercial insurance only. It was based on character of production and of export of small and medium-sized enterprises with typical short-term receivables predominantly in neighbouring countries, i.e. primarily marketable receivables. Even though it has been a part of the system of the state support of export, EGAP has offered also the commercial insurance of short-term receivables since the beginning of its existence. It started with the export receivables only but since 1997 domestic receivables have bee added and, today, more than 70 per cent of clients of the commercial insurance are the small and medium-sized enterprises. In the interests of a transparent separation of the commercial insurance from the insurance with state support, EGAP established a subsidiary - the Commercial Credit Insurance Company EGAP to which all commercial activities were transferred as of 1 October 2005. Simultaneously, EGAP lobbied with others in Brussels that state credit insurance companies could more distinctly enter with their offer also the segment of the small and medium-sized enterprises. It succeeded. On 1 January 2006, the Communication of the Commission to member states entered in force which enabled this. On its basis, EGAP intends to address predominantly small companies with a limited volume of exports which are not economically attractive for commercial credit insurance companies because the insurance of their receivables brings minimal revenues with unproportionally high costs.

From now on, advantages of the insurance of export receivables with state support may be used by small and medium-sized enterprises with an annual export turnover not exceeding €2 million. The first tangible offer of EGAP in this direction is a significantly simpler and much quicker insurance of pre-export credits and bank guarantees. This innovation is being tested together with the Czech Savings Bank and with Bawag Bank CZ but in case there is interest it is prepared to cooperate also with other banks. What is the base of this innovation? In the first place, often prolonged discussions of individual business transactions with financing banks and exporters fall off. EGAP has concluded framework agreements with above-mentioned banks which integrate the process of analysing and assessment of risks of individual companies between the bank and insurance company and simultaneously contains templates of insurance contracts It means in practice that preparation of an insurance contract lies primarily in a mere filling in of specific data on a given company and on the business transaction, insurance premium rate and calculation of the insurance premium. Another good news for the insured is also that his self-retention in the insurance of a credit for the pre-export financing shall be decreased after the first loss-free business transaction from 20 % to 10 % and the calculation of the insurance premium is lowered by costs incurred by the exporter on entry audit of the export contract made by an independent inspection company. The insured thus saves not only time but also money.

The insurance of pre-export credits and bank guarantees for small and medium-sized enterprises under a new regime is a concrete example of fulfilling the "Export Strategy of the Czech Republic for the Period 2006 - 2010" approved by the government of the Czech Republic a couple o weeks ago. One of priorities of the Strategy is the support of export activities of small and medium-sized and of their competitiveness on international markets. EGAP has been helping in it not only by facilitating access to financial funds for realization of export plans but also by lifting from them risks of arising of doubtful receivables. Therefore the next step will be the new form of the insurance of a supplier credit accessible on-line which will be maximally simplified and user friendly to needs of small and medium-sized exporters.

Petr Martásek
Department Director