Estimated reading time: 5 minutes

The Export Credit Agency of Bosnia and Herzegovina IGA plays a pivotal role in driving economic growth and supporting the country’s exporters. As an export credit agency (ECA), our main objective is to help businesses navigate the complexities of international trade by providing access to finance, managing risk, and offering other crucial support services. 

This mission is of particular importance to Bosnia and Herzegovina, a small economy where exports serve as a critical source of revenue and employment. By supporting our exporters, we are not only facilitating their business growth but also contributing to the overall development of our economy. 

Trade credit insurance is a type of insurance designed to protect businesses against the risk of non-payment by their customers. It provides businesses with a safety net by covering losses arising from unpaid trade credit debts due to reasons such as insolvency, bankruptcy, or protracted default. The insurance policy is tailored to the specific needs of the business and can cover a single debtor or an entire portfolio of debtors.

Benefits of trade credit insurance

Trade credit insurance provides businesses with several benefits. 

• Firstly, it helps to manage the risks associated with credit sales, enabling businesses to expand their customer base and increase sales while mitigating the risk of non-payment. This, in turn, can boost cash flow and support business growth. 
• Secondly, trade credit insurance can enhance a business’s credit management processes by providing access to valuable data and insights on customers’ creditworthiness. This can help businesses make informed decisions about which customer to extend credit to and how much credit to offer. 
• Finally, trade credit insurance can provide businesses with peace of mind, knowing that they are protected against the risk of non-payment, allowing them to focus on other aspects of their operations.

Trade credit insurance is particularly beneficial for small and medium-sized enterprises (SMEs), which are often more vulnerable to the impact of non-payment by customers. SMEs may lack the resources to absorb the financial losses that result from non-payment, making trade credit insurance a valuable tool for managing their credit risk.

Risk management in ECAs

As the head of the Credit Insurance Department, my role is vital in supporting exporters by helping them manage the risks associated with international trade. Collaborating closely with other departments, I ensure that exporters have access to the appropriate level and type of credit insurance to safeguard their businesses and streamline their export operations. 

As an actuary, I employ mathematical and statistical techniques to assess and quantify risk. My expertise in actuarial science is particularly valuable in evaluating and pricing the risks of various export transactions, allowing the Agency to make informed decisions about which transactions to support and how to price credit insurance and other support services. 

As the head of the Monitoring Department, I oversee the tracking and management of credit risks linked with the agency’s portfolio of export and domestic transactions. The key role of the monitoring department is to help the agency maintain a healthy and sustainable portfolio of export and domestic transactions. 

Case study: Insuring SMEs when everything seems fine

Bosnia and Herzegovina IGA has played a vital role in supporting economic growth in recent years, and one case study stands out in particular. A medium-sized manufacturing company based in Bosnia and Herzegovina had been supplying goods to a customer in Germany for several years. 

The customer had always paid their invoices on time, and the company had never experienced any payment issues. However, in 2020, the German customer faced financial difficulties stemming from COVID and filed for bankruptcy, leaving the Bosnian manufacturer with a significant outstanding invoice.

Fortunately, our client filed a claim with the agency for the outstanding invoice, and after due diligence, the claim was approved. The agency paid the claim within 30 days, enabling the Bosnian manufacturer to recoup the funds they were owed.

Thanks to the trade credit insurance policy, the Bosnian manufacturer did not face any liquidity or cash flow issues, which could have had a severe impact on their business. They were able to continue their operations smoothly, and the claim payment helped them to pay their suppliers and maintain their cash flow. 

This successful outcome is a testament to the importance of trade credit insurance for businesses, particularly during challenging economic times. By protecting against the risk of non-payment by customers, trade credit insurance provides businesses with peace of mind and enables them to focus on their core operations without worrying about the impact of unpaid debts.

However, despite our past successes, the Export Credit Agency of Bosnia and Herzegovina is currently facing significant challenges that are impeding our ability to fulfill our mandate and support exporters.   The operations have come to a standstill as a result of a final judgement. The subsequent blocking of our main account has left us unable to conduct business, compelling us to await a decision from the Council of Ministers of Bosnia and Herzegovina. 

The impact on business operations:

The blocking of our main account has had far-reaching consequences, severely hindering our ability to deliver services and fulfill our commitments to clients and partners. The agency finds itself in a state of stasis, as we navigate the complexities of the situation and strive to find a resolution. The uncertainty surrounding the final judgment has created an atmosphere of caution, with all operations on hold until further notice.

Engagement with authorities:

To rectify this distressing situation, we have proactively engaged with the relevant authorities. Our agency maintains ongoing communication with the Council of Ministers of Bosnia and Herzegovina, seeking clarity on the matter and advocating for a prompt resolution. Our goal is to obtain a decision that will allow us to resume operations, enabling us to serve our clients efficiently and effectively.

Mitigating the effects and ensuring business continuity

During this interim phase, we recognise the importance of minimising disruptions and maintaining the trust of our valued stakeholders. Our dedicated team is diligently monitoring the decision-making process and exploring all available options to mitigate the effects of the account blockage. 

As we await a decision from the Council of Ministers of Bosnia and Herzegovina, uncertainty prevails over our agency’s future. However, we are actively engaged in seeking a resolution, maintaining open lines of communication with the authorities, and keeping our stakeholders informed of any progress. With our unwavering commitment and diligent efforts, we are confident in our ability to overcome this setback and regain full operational capability, ensuring the continuity of our business and the satisfaction of our valued clients and partners.

As a result, we are unable to contribute fully to the growth and development of the Bosnian economy. We recognise the importance of addressing these challenges and remain committed to finding innovative solutions to support our exporters and promote economic growth in Bosnia and Herzegovina.