One of the core tasks of ICISA is to represent members’ interests by making our products known to benefit of national and international economies. Our invigorated relationship with the International Chamber of Commerce (ICC) is an example of this. For instance, ICISA’s surety committee is working with the ICC to develop digital standards for international trade, specifically in the customs bond area. Another example is ICISA’s recent membership of the ICC Banking Committee, where matters of mutual interest are discussed.
Recently, ICISA was invited to speak at ICC Ghana’s inaugural Sustainable Supply Chain Summit in Accra. We used this opportunity to increase awareness of our products and to highlight the importance of Trade Credit Insurance to stimulate economies. This summit coincided with the renewed push of the African Continental Free Trade Area (AfCFTA) to establish economic ties within Africa so as to establish a single, liberalized market for goods, services, labour, and capital. The overall aim of AfCFTA is to increase socioeconomic development, reduce poverty and make Africa more competitive in the global economy.
During the first day of the two-day summit, the emphasis was mostly on physical supply chains: infrastructure, the possibility to stimulate activity of micro, small and medium-sized enterprises (MSMEs). During the second day, financial consideration played a big role. These two aspects are intertwined and finance on the African continent is more scarce than desired. With an eye on our business, the role of trade credit insurance in sub-Saharan Africa is largely confined to South Africa. The portfolio of risks emanating from sub-Saharan Africa (whether from private insurers or from government-backed entities) is extremely small.
As we know, trade credit insurance can be one of the missing pieces of the puzzle to finance business. Given the general lack of financial literacy and collateral, financial institutions have issues providing the necessary capacity to adequately finance African economic activity. Trade credit insurance can play a role in stimulating the financial capacity by offering a policy as collateral. For this, a number of pre-conditions must be met.
One of these pre-conditions is institutional stimulus. Through our cooperation with FCI (the internationally operating factoring network), we know that the regional development bank is making efforts to establish local financial infrastructure. That is tremendously helpful. Another pre-condition is that economic actors in the region know what our product is and its use. Whilst no single actor or institution can fulfil these pre-conditions, ICISA sees this as an important developmental task.
Other pre-conditions are harder to meet and will take time and willingness from local authorities and societies at large: (1) legal infrastructure and (2) information. We used the summit to impress the local officials of the need of creating a legal framework for pursuing debts. This includes local laws, frictionless working of the court system and the lack of arbitrary outcomes, sometimes based on corruption. Secondly, the credit insurer must be able to assess the risk at hand on basis of trustworthy, current, and accessible buyer information. Whilst this is understood, there is a long way to go.
However, daunting the obstacles might be, we see this as an opportunity for the African economy markets and our industry. Things will not change overnight. The time path will be measured in years if not decades. However, this is not a reason to neglect this market of the future. ICISA will continue to contribute to the development of our industry, also on the African continent.