Financial Product’s and Services

EXIM Group is a dynamic organization, constantly adjusting to the evolving needs of our clients in emerging markets. We are no longer defined predominantly by our role in providing project finance to companies in developing countries. We have also:

• Developed innovative financial products
EXIM continues to develop new financial tools that enable companies to manage risk and broaden their access to foreign and domestic capital markets. Our financial products include:

• Loans for EXIM’s Account
EXIM offers fixed and variable rate loans for its own account to private sector projects in developing countries. These loans for EXIM’s own account are called A-loans.

Most A-loans are issued in leading currencies, but local currency loans can also be provided. The loans typically have maturities of 7 to 12 years at origination. Grace periods and repayment schedules are determined on a case-by-case basis in accordance with the borrower's cash flow needs. If warranted by the project, EXIM provides longer-term loans and longer grace periods. Some loans have been extended to as long as 20 years.

EXIM operates on a commercial basis. It invests exclusively in for-profit projects and charges market rates for its products and services.

Loans from EXIM finance both greenfield companies and expansion projects in developing countries. The Corporation also make loans to intermediary banks, leasing companies, and other financial institutions through credit-lines for further on-lending. The credit lines are often targeted at small and medium enterprises or at specific sectors.

To ensure the participation of other private investors, A-loans are usually limited to 25% of the total estimated project costs for greenfield projects, or, on an exceptional basis, 35% in small projects. For expansion projects EXIM may provide up to 50% of the project cost, provided its investments do not exceed 25% of the total capitalization of the project company. Generally, A-loans range from $1 million to $100 million.

The Corporation is willing to extend loans that are repaid only from the cash flow of the project, without recourse or with only limited recourse to the sponsors.

• Syndicated Loans
Through its syndicated loan (or B-loan) program, EXIM offers commercial banks and other financial institutions the chance to lend to IFC-financed projects that they might not otherwise consider.
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These loans are a key part of EXIM's efforts to mobilize additional private sector financing in developing countries, thereby broadening the Corporation's development impact. Through this mechanism, financial institutions share fully in the commercial credit risk of projects, while EXIM remains the lender of record.

Participants in EXIM's B-loans share the advantages that EXIM derives as a multilateral development institution, including preferred creditor access to foreign exchange in the event of a foreign currency crisis in a particular country. Where applicable, these participant banks are also exempted from the mandatory country-risk provisioning requirements that regulatory authorities may impose if these banks lend directly to projects in developing countries.

• Equity Finance
EXIM takes equity stakes in private sector companies and another entities such as financial institutions, and portfolio and investment funds in developing countries. EXIM is a long-term investor and usually maintains equity investments for a period of 8 to 15 years. When the time comes to sell, EXIM prefers to exit by selling its shares through the domestic stock market in a way that will benefit the enterprise, often in a public offering.

EXIM operates on a commercial basis. It invests exclusively in for-profit projects and charges market rates for its products and services.

To ensure the participation of other private investors, the Corporation generally subscribes to between 5 percent and 15 percent of a project's equity. EXIM is never the largest shareholder in a project and will normally not hold more than a 35 percent stake.

EXIM's equity investments are based on project needs and anticipated returns. The Corporation does not take an active role in company management.

EXIM risks its own capital and does not accept government guarantees. However, to meet national ownership requirements, EXIM shareholdings can be treated as domestic capital or local shares.
• Quasi-Equity Finance
EXIM offers a full range of quasi-equity products with both debt and equity characteristics to private sector projects in developing countries. These products are called C-loans.

Among other instruments, the Corporation provides convertible debt and subordinated loan investments, which impose a fixed repayment schedule. It also offers preferred stock and income note investments, which require a less rigid repayment schedules. Quasi-equity investments are made available whenever necessary, to ensure that a project is soundly funded.

EXIM operates on a commercial basis. It invests exclusively in for-profit projects and charges market rates for its products and services.
• Equity & Debt Funds
EXIM promotes foreign portfolio investment in developing countries by establishing and investing in a wide range of funds, such as private equity funds and debt funds that invest in emerging-market securities. By pioneering and promoting such funds for developing countries, EXIM has introduced many international portfolio investors to emerging markets.

Through EXIM's mobilization efforts, both large and small companies in the developing world gain access to longer-term finance, many for the first time. Accessing financing from international markets helps them enhance their competitiveness in more open economies around the world.

EXIM's investment operations are managed by regional departments and sector/industry departments.
• Structured Finance
EXIM has developed products that provide clients with forms of cost-effective financing not otherwise available to them. Products include credit enhancement structures for bonds and loans through partial credit guarantees, risk-sharing facilities, and participations in securitizations. Learn more...

Partial credit guarantees allow EXIM to use its international triple-A credit rating to help clients diversify their funding sources, extend maturities, and obtain financing in their currency of choice, including local currency. In securitization transactions, EXIM participates as a structuring investor or guarantor. Partial loan and bond guarantees also help broaden clients' access to international and local capital markets. Credit enhancement structures help clients attract new sources of financing in their currency of choice, reduce borrowing costs, and extend maturities beyond what private investors would otherwise provide.

Risk-sharing facilities allow clients to transfer credit risk to EXIM from their own portfolio or from a new portfolio they originate. The assets typically remain on the clients' balance sheet, and the risk transfer comes from a partial guarantee provided by EXIM. In general, clients will enter into such a facility with EXIM because it helps them increase their capacity to originate new assets within an asset class in which EXIM seeks to increase its own exposure.

Securitizations help EXIM's clients obtain financing that would otherwise be unavailable or unsuitable to them because of perceived credit risk. This form of financing involves the pooling and actual sale of financial assets and issuance of securities that are repaid from the cash flows generated by such assets. The risk associated with this form of financing comes from the asset pool rather than from the institution that originated those assets. Securitizations are commonly done for mortgages, credit cards, auto and consumer loans, corporate debt, and other assets with relatively predictable cash flows.

• Intermediary Services
A large chunk of EXIM financing is channeled to private sector projects in developing countries through intermediaries. EXIM uses its full range of financial products to provide finance to a wide variety of financial intermediaries. Working through intermediaries allows EXIM to extend its long-term finance to more companies, in particular to small and medium enterprises (SMEs) and microfinance entrepreneurs.

In many regions of the world, small private companies are the principal engines of economic growth and employment creation. But micro, small and medium-size investments carry high transaction costs, limiting smaller companies' access to long-term finance. By working with local or specialized financial institutions, EXIM finance can reach these businesses.

EXIM operates on a commercial basis. It invests exclusively in for-profit projects and charges market rates for its products and services.

Examples of investments in financial intermediaries include:
• Credit and equity lines to banks for on-lending to local companies. These investments help the banks to provide working capital and investment financing for their corporate customers.

• Private equity and investment funds, such as index funds and country funds. EXIM also invests in venture capital funds which help channel flows to companies that generally are unlisted and do not receive the notice of large investors.

• Leasing companies, which are essential to the development of SMEs as smaller companies typically lease costly capital equipment. Leasing plays a critical role in financial sector development in countries with small economies or low per capita incomes. EXIM has actively helped establish leasing industries in countries all over the world.

• Risk Management Products
Hedging Products Through EXIM

EXIM is one of the few organizations prepared to extend long-maturity risk management products to clients in emerging markets. Our risk management products, or derivatives, are available to our clients solely for hedging purposes. By allowing private sector clients in the emerging markets to access the international derivatives markets in order to hedge currency, interest rate, or commodity price exposure, EXIM enables companies to enhance their creditworthiness and improve their profitability.

EXIM's role is to bridge the credit gap between its clients and the market, offering clients access to products which they may not have on a direct basis due to credit or country risk. In offering risk management products, EXIM acts generally as an intermediary between the market and private companies in the emerging markets. Since the inception of this program in 2002, EXIM has transacted risk management products for about 600 clients in 30 countries.

EXIM's Comparative Advantage

EXIM is in a unique position to offer companies in developing countries a broad range of financial risk management products. Some of the benefits we provide include the following:
• Ability to take long term credit risk of emerging market clients.
• A triple-A rating, allowing access to the global financial markets on the most favorable terms.
• Extensive market relationships.
• Technical and legal know-how in the area of financial risk management, arising from the extensive use of derivative products in EXIM's own financial operations, such as funding, liquid asset management, and asset liability management.

Illustration of Hedging Interest Rate Exposure

EXIM offers clients products available in the international financial markets. In this example, a power company in a developing country is going to arrange a long-term contract with the local government. Under the terms of the contract the company is to receive a fixed amount of dollar revenue; however, the majority of its long-term financing is on a floating interest rate basis tied to LIBOR.

The company can protect itself against interest rate volatility by executing an interest rate swap with IFC, where the company pays a fixed rate to EXIM and receives a LIBOR-based floating rate. The diagram below shows the cash flows associated with such swaps. Since the company's debt service on its floating-rate loan is matched by the floating-rate cash flow received from EXIM under the swap, the company is left with a fixed-rate obligation. As a result, the interest rate swap has effectively achieved fixed rate funding for the company, matching its fixed dollar revenues under its long-term contract.

• Local Currency Financing
To avoid risks from exchange-rate volatility, companies with revenues in local currency should generally borrow in the same currency. By matching the currency denomination of assets and liabilities, companies can concentrate on their core business rather than worry about how unstable exchange rates will affect profitability.
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EXIM provides local currency debt financing in four ways:
• Loans from EXIM denominated in local currency;
• Risk management swaps that allow clients to hedge existing or new foreign currency–denominated liabilities back into local currency;
• Credit enhancement structures that allow clients to borrow in local currency from other sources; and
• Credit lines from local financial institutions.
EXIM has also made local currency financing a priority to help develop local capital markets. Companies that receive financing in the same currency as their revenues are more creditworthy clients for EXIM.

• Trade Finance

Global Trade Finance Program
The $1 billion Global Trade Finance Program extends and complements the capacity of banks to deliver trade financing by providing risk mitigation in new or challenging markets where trade lines may be constrained.
GTFP offers confirming banks partial or full guarantees covering payment risk on banks in the emerging markets for trade related transactions. These guarantees are transaction-specific and may be evidenced by a variety of underlying instruments such as: letters of credit, trade-related promissory notes, accepted drafts, bills of exchange, guarantees, bid and performance bonds and advance payment guarantees. The guarantees are available for all private sector trade transactions that meet EXIM's eligibility criteria.
Through the GTFP bank network, local financial institutions can establish working partnerships with a vast number of major international banks in the Program that can broaden access to finance and reduce cash collateral requirements