- For exporters
- Support within the framework of the SPIIAD: export and trade financing
- Exporter’s credit insurance
Support within the framework of the SPIIAD: export and trade financing
At the end of 2010, the Corporation, reserving the insurance functions, developed and launched a new program on provision of the financial support to purchasers of the Kazakhstani non-primary products.
One of the main objectives of the Program is to stimulate demand for domestic products from foreign buyers through the provision of trade financing on favourable terms. Financing is provided indirectly through the second-tier banks of Kazakhstan in the framework of the letter of credit payment method.
For Kazakhstani banks, this Financing program (under insurance coverage of and at the expense of KazExportGarant) provides an opportunity for:
- Insurance of up to 100% of the risk of default on obligations by the issuing banks;
- Expansion of the product line;
- Expansion of the customer base.
Trade financing scheme with the insurance coverage provided by KazExportGarant is as follows:
Stepwise description of the procedure under the scheme “Trade financing”:
- The Exporter and the Importer conclude a contract for the supply of goods/services.
- The Importer submits application to the Importer’s Bank (issuing Bank) to issue a letter of credit.
- The Importer’s Bank (issuing Bank) issues a letter of credit with a request to add a confirmation.
- Conclusion of the Insurance contract between the Exporter’s Bank (confirming Bank) and KazExportGarant*.
- The Exporter’s Bank (confirming bank) advises the documentary letter of credit with the addition of its confirmation.
- Delivery of goods/services.
- The Exporter submits to the Exporter’s Bank (confirming Bank) documents that meet the conditions and validity of the letter of credit for payment.
- The Exporter’s Bank (confirming Bank) and KazExportGarant conclude a Deposit contract (placing the deposit for payment under the letter of credit).
- The Exporter’s Bank (confirming Bank) makes payment in favour of the Exporter (using the funds placed by KazExportGarant) while providing financing to the Importer through the issuing Bank for the requested period. The Exporter’s Bank (confirming Bank) sends documents to the Importer’s Bank (issuing Bank).
- The Importer’s Bank (issuing Bank) returns the amount of financing (principal debt and interest) on a specified date.
- The Exporter’s Bank (confirming Bank) returns the amount of deposit of KazExportGarant.
- Return of the amount of financing (principal debt and interest)
What risks are covered by the insurance coverage?
- business failure of the issuing Bank;
- default of payment by the issuing Bank within a time frame set by the terms of the letter of credit.
- actions of the governmental authority in the country of the Bank issuing the letter of credit on the expropriation, confiscation of the product/service supplied under the contract, or intervention of discriminatory nature in the activities of the Bank, preventing execution of the letter of credit;
- war, civil commotion, mass riots in the country of the issuing Bank, preventing the issuing Bank from the fulfilment of its obligations under the letter of credit;
- actions of the governmental authority in the country of the issuing Bank restricting or prohibiting the conversion into a freely convertible currency and/or transfer of the payment under the letter of credit.
What is the share of the insurance coverage?
- Political risks - up to 100% of the letter of credit.
- Commercial risks - up to 100% of the amount of the letter of credit.
What is the amount of the insurance rate?
The insurance rate is determined on the basis of evaluation of the country risk, and the analysis of the Importer’s Bank (issuing Bank).
Terms of financing and financing expenses for the Importer’s Bank (issuing Bank):
- financing is provided under contracts for the supply of a non-primary product/service of Kazakh origin.
- rate for financing: СIRR + 2% per annum
- CIRR (Commercial Interest Reference Rate) is a minimum official rate on export credits, which can be established by the export credit agencies in the countries that are members of the Organization for Economic Cooperation and Development: it is reviewed on the 15th day of each month and is based on the interest rate determined by the government bonds (placed on the domestic market of the country, expressed in the terms of the national currency of that country). Information on the rate is publicly available and published on the website of the OECD.
- financing period - up to 1 year
- maximum size of one deposit (placed for each received package of shipping documents) - 150 million KZT or equivalent amount in foreign currency. Several packages of documents may be provided for the payment under a letter of credit, and no limit is set for the maximum amount under one letter of credit, the limit is set only on the amount of each package of documents.