An official agency in Singapore says it is to launch a trade credit insurance programme that will allow the firms it supports to compete more effectively in global markets than those employing letters of credit (L/Cs).

Export credit insurance is not a common trade financing option in Singapore, but it appears to have the supporters amongst Singapore's top politicians.

L/Cs losing favour

International Enterprise Singapore (IE Singapore) says in its marketing material for its new trade credit insurance that amid the growth in global trade, L/Cs appear to be losing favour.

According to the agency, this is because global clients now prefer to buy from suppliers on open account or credit provided by suppliers.

Insurance alternative

IE Singapore says that with its trade credit insurance, suppliers can offer to sell goods on open account or credit terms.

The agency also says that suppliers covered by its trade credit insurance are protected against bad debts.

Low take up

Unlike in Europe, where IE Singapore says more than 40 per cent of companies already offer open accounts to their clients, many Singapore exporters have yet to use similar terms.

The majority of exporters from Singapore do not use trade credit insurance either according to the minister of state for trade, industry and education, Chan Soo Sen. "The use of trade credit insurance in Singapore is still relatively low. Of our total trade last year, less than 2 percent of that was credit insured," he said.

Public-private partnership

Insurance in the programme will be made available under a public-private partnership of IE Singapore with underwriters ECICS and QBE offering insurance cover and DBS Bank and Standard Chartered Bank as partners provide financing as an additional feature.

Risk and insurance services firm Marsh has been appointed the arranger, insurance advisor and risk consultant for the programme.

Formerly known as the Singapore Trade Development Board, IE Singapore is the official agency for promoting firms from Singapore in international markets.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.