To put it lightly, the past few years have been a rollercoaster ride for trade finance. Recent challenges have pushed the industry to the boundaries, which has created significant angst for many. However, this struggle also has a silver lining.
New strategies have emerged for public and private actors to counter the emerging issues, helping increase resiliency and create new opportunities. To learn more about these strategies, Trade Finance Global’s (TFG) Deepesh Patel spoke with Michal Ron, chief international business officer at the Italian ECA, SACE.
The Push Strategy: targetted strategies for Italian SMEs
In 2017, SACE launched a “Push Strategy”, aiming to help Italian SME exporters gain a foothold in international trade. This strategy aimed to provide medium-to-long-term financing for select foreign buyers to access the Italian SME market.
According to SACE, the Push Strategy uses untied guarantees, which are “loans at competitive terms to increase the procurement of goods and services from Italy”, but the loan is not conditional on investment into Italy.
Because the Push Strategy is an untied facility, SACE has strict eligibility criteria. Ron said, “We select very carefully. It’s almost surgical in the position. We try to push the buyers towards our SMEs, but generally Italian companies in the relevant sector, who can bring value and increase exports from Italy.”
The program offers an attractive solution for international buyers, as there is limited commitment on their end. The only condition from the buyer side is participating in a matchmaking event with Italian SMEs.
So far, the Push Strategy has been a successful tool for Italian exporters, helping many SMEs survive an otherwise tough economic environment. As of 2022, this program has supported over €4.6 billion, and increased Italian exports by roughly €1.7 billion.
Like everything else in the trade finance world, this strategy was impacted by all the disruptions in recent years. COVID-19, the Russian-Ukraine war and further geopolitical strife have created supply chain issues that have the potential to spill over into other parts of the economy.
The supply chain issues within the Italian economy are worrisome for SACE, so they decided to step in as well. Ron said, “We target companies overseas that are suppliers, and we do it through large traders, and also through banks.”
By helping increase the import of important materials, i.e. plastics, nickel, rare earth metals, etc., SACE has found another way to support Italian exporters.
Parallel themes: Supporting ESG and SMEs
Like many international organisations, SACE has prioritised ESG initiatives in recent years. Initially, SACE helped support domestic sustainability projects but recently has started to expand towards international green initiatives.
SACE has started to use the EU structure, the New Green Guarantee, to push sustainable projects. Ron said, “We’ve started working with Italian companies in issuing green guarantees. So far we have a guaranteed volume close to €6 billion.”
Many of these guarantees have gone towards assisting Italian companies in their transition towards renewable energy. This is part of a larger strategy by the Italian government of moving towards a sustainable future. Ron said that SACE is “working to adhere to our country’s commitment both at the COP 26 and also export finance for future, Export Finance for Future (E3F), of which we are one of ten signatories.”
One of the challenges facing SACE is how to support a variety of industries during this transition. Ron pointed out that there is a dilemma, “As an export credit agency, we support our national champions, they might be in the oil and gas sector, as is the case in Italy.”
This means having to tailor the support differently depending on the structure of the company. There cannot be an expectation for all countries to immediately phase out oil and gas, but instead, SACE is looking to incentivise the transition.
Because of the Italian government’s commitment to adopting more renewable energies, there are restrictions on which projects can be financed moving forward.
Ron summarised the dilemma, “On one hand, we are clearly preparing ourselves for a very important transition. On the other hand, there are also geopolitical issues that we need to address.”