EXPORT Credit Guarantee Corporation of Zimbabwe (ECGC), a subsidiary of the Reserve Bank of Zimbabwe (RBZ), this week said despite current obstacles to getting credit insurance, it has seen an increase in production capacity.
The increase in production capacity, according to ECGC, has seen the economy meeting both local and export demand at a time exporter clients have also ventured into new markets.
Credit insurance helps businesses mitigate the risks associated with customers or debtors in Zimbabwe or outside failing to pay their debts.
By receiving compensation from the insurer, businesses are able to replace lost revenue and maintain uninterrupted cash flows.
Furthermore, lenders are more likely to provide financing to businesses with credit insurance.
But ECGC chief executive officer Sekai Chirume told businessdigest that there were challenges in obtaining credit insurance in Zimbabwe, which include the perception that some policies are overpriced relative to benefits.
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"There is also a general lack of knowledge of what credit insurance is all about as comprehending the policy document especially the fine print which may complicate the claims process,” she said.
“There is a need for massive awareness about credit insurance starting with the financial sector, exporters and suppliers of goods and services and emphasis should be placed very much on the benefits accruing from the credit insurance policy.”
Chirume said the insurers should factor in the cost of the insurance to enable the policyholder to remain competitive in terms of their pricing.
"Over the years, some of our export clients have ventured into new markets where they have recorded increased sales on the back of our policies, while others have started dealing with new buyers in some markets due to the thorough buyer or customer due diligence that we do. This has resulted in increased production capacity to satisfy both local and export demand,” she said.
Chirume noted that there were also challenges in the underwriting of debtors or credit risk, particularly in Zimbabwe, which included lack of credible information on the buyers and the fact that not many credit bureaus provided credit reports were available.
She added that the cost of buyer reports was also a challenge.
"As ECGC, we continue to reach out to industry bodies, such as ZimTrade, ZNCC (Zimbabwe National Chamber of Commerce) and CZI (Confederation of Zimbabwe Industries) to bring awareness to their members about the benefits of taking up credit insurance in their businesses,” Chirume said.
“We are also in touch with the financial sector whose portfolio of clients include exporters and encourage them to advise their clients on the need to protect their receivables.”
Last week, Invent Multiple Agencies and Actuaries (Invent), a local actuarial consulting firm, announced that it had developed a credit insurance product to cover Zimbabwean imports from South Africa in a major boost for the growth of local firms.
Zimbabwean firms have been forced to import on a cash basis due to the tough operating environment.