Trade experts, policy makers, the business community and financial sectors in Uganda have expressed support for the establishment of an export credit and insurance guarantee scheme to provide trade finance, de-risk exports and boost Ugandan companies’ capacity to trade beyond our borders.
At a recent meeting hosted at EPRC, players from government, financial sector, and general business community were of the consensus that the establishment of the export credit scheme would be a game-changer to lower risk and secure better prices for their goods. Philemon Okillong, a research analyst at EPRC, said exporters encounter a myriad of risks, fear of which could be addressed by having such a scheme. The risks include buyer insolvency, political conflicts (such as the recent conflicts in Sudan and South Sudan), and currency transfer restrictions. Relatedly, owing to constraints about accessing trade finance, the scheme would go a long way to support both pre-shipment and post-shipment credit needs.
“Ugandan tea exporters, who rely heavily on colonial-era auction systems, lose significant value to intermediaries because they lack the financial backing to engage in direct international sales. A well-structured export credit guarantee scheme could empower these exporters to bypass intermediaries and supply directly to buyers abroad…,” Mr. Okillong noted.
Mr. Richard Okello, the assistant commissioner of external trade at ministry of trade, said lack of export guarantee scheme has cost Uganda deals in past. He cited an undisclosed $500 million export deal with Algeria that did not take off because local exporters could not secure a performance guarantee bond—a financial instrument that assures buyers of contract fulfillment.
Expert views are to be synthesised in a new policy paper by EPRC to guide responsible agencies led by Ministry of Trade, Industries and Cooperatives (MTIC) and Ministry of Finance, Planning and Economic Development (MOFPED) to facilitate the establishment of the scheme.
Dr. Isaac Shinyekwa, the head of EPRC Trade and Regional Integration Department, stressed the significance of the scheme. “This scheme is not a luxury—it is a necessity. Without it, Ugandan exporters will continue to lose out to competitors in high-risk markets.”