The UAE's federal export credit company, Etihad Credit Insurance (ECI), has launched a new specialised insurance cover for UAE-based companies involved in international trade.

The new cover is aimed at weaning UAE-based traders off letters of credit (L/Cs) that are used in nearly every trade transaction executed by small- and medium-sized enterprises (SMEs) in the country.

The purpose of the new insurance product is to help SMEs grow their businesses globally and compete more effectively in global markets.

Trade credit solution

ECI is presenting the new product, SME Protect, as a "trade credit solution" to enhance the global competitiveness of UAE-based companies.

With SME Protect, ECI says companies participating in international trade "can move away from the limiting and traditional L/Cs or cash payments terms, towards the most updated sales on open credit terms. This will help them expand their operations to more countries with less hassle and paperwork."

Over-reliance on L/Cs

Chief executive of ECI, Massimo Falcioni, says the new solution responds to a survey conducted in 2018 in co-operation with Abu Dhabi Chamber of Commerce, Dubai Chamber of Commerce, and Ras Al Khaimah Chamber of Commerce.

It showed that 97 per cent of SMEs still prefer L/C and cash payments whereas only three per cent prefer selling on credit.

According to Falcioni, SME Protect will enable companies to negotiate better terms with trading partners worldwide.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.