Introduction
A key challenge faced by Malawian exporters is lack of appropriate export financing that could support them to compete against exporters from other countries in Africa and overseas. Most developed economies offer their exporters export credit schemes and other forms of financing which, in many instances, provide support either to African importers of such exports or African financial institutions in their regions. The extent to which Malawian exporters face competition from other regions is therefore magnified by the capacity of other economies to offer efficient and affordable financing to their exporters that help deliver goods of comparable quality into the continent at competitive pricing.
Product Rationale
Export Packing Credit Facility aims to bridge the gap in financing towards Malawian exporters particularly with regards to meeting costs related to procurement of raw materials, processing, packaging and other direct expenses related to the exports with a view to:
- Increase access to financing for Malawian exporters, particularly, as a significant constituent of these exporters may not easily obtain banking facilities from their bankers for a number of reasons.
- Support Malawian exporters to compete with peers from other regions with regards to pricing;
- Increase participation by SMEs in production value chains;
- Promote the use of trade instruments including Domestic Letters of Credit (DLC) and similar trade instruments and thus deepening trade finance system;
- Grow the number export of manufacturers from Malawi, beginning with light manufacturers and increased processing and value-addition of agricultural commodities.
Eligibility
Qualifying/Eligible Entities:
- Malawian based and/or owned entity registered under the company Act 2013.
- must demonstrate that at least 30 per cent of goods or services produced are exported or are destined for export.
Eligible Costs:
Preference shall be given to costs related to the following export value chain processes:
- Procurement of raw materials/ intermediate goods and/or other inputs;
- Manufacturing process or other forms of transformation of Malawian goods and/or services;
- Wages and salaries for production staff;
- Direct costs including transportation/ shipping/ handling/ insurance etc.; and
- Packaging and/or branding.
Qualifying Instruments
Direct advances as follows:
- to the Borrower and/or the Borrower’s suppliers of raw materials/intermediate products and other inputs;
- to the Borrower to meet working capital requirements including salaries/wages/ utility bills etc.; and
- to the Borrower or third party service providers for meeting costs such as transport/shipping/handling etc.
Lines of Credit as follows:
- Short-term Line of Credit extended by EDF to intermediary financial institutions.
- Refinancing of pre-shipment export finance facilities already extended by financial institutions.
Tenor and Final Maturity
- Tenors of up to 360 days for the facility’s transactions with simple trade cycles and up to 24 months for complex export transactions
Sources of Repayment
- Export Packing Credit Facility exposures will be paid off from:
- export proceeds assigned to the Fund under an LC or other trade instrument; and
- For EPC Lines of Credit, a collection account will be opened through which all export proceeds of sub-borrowers shall be assigned.
Collateral Arrangements
Collateral for the Facility may include a combination of:
- Assignment of Export Contracts;
- Assignment of export proceeds and/or cash flows from the Exporter;
- Promissory Notes issued by Financial Institutions obtaining Export Packing Credit Facility’s Lines of Credit;
- Charge over Collection Accounts; and
- Any other collateral as may be mutually agreed between the Fund and the Borrower.
Application Requirements
- Business/owners profile
- Nature of business and funding requirements.
- Audited financial statements for three years.
- Financial projections
- A summary of borrowing history and bank references.