Why Credit Risk is a Barrier for Lending

For many UAE banks, supporting local exporters, especially SMEs, comes with one major hurdle: risk.

Lenders often hesitate to extend financing to exporters trading on open account terms due to concerns around buyer defaults, geopolitical instability, or payment delays. This leads to conservative credit limits, delayed approvals, and missed growth opportunities.

But with trade credit insurance (TCI) in place, banks can de-risk lending and empower their clients to grow securely while protecting their own portfolios.

1. Reducing Risk Exposure on Export Loans

Trade credit insurance gives banks a safety net. When a borrower’s export receivables are insured by Etihad Credit Insurance (ECI), the lender is protected if the buyer defaults, delays payment, or is impacted by political events.

How it helps banks:

• Protects up to 90% of insured invoice value
• Encourages faster and more confident credit approvals
• Reduces provisioning needs and improves capital efficiency

2. Supporting More Competitive Financing

With TCI coverage, banks can offer better financing terms to exporters, such as:

• Higher credit limits
• Longer tenors
• Flexible collateral structures

This not only helps exporters secure working capital but also positions the bank as a growth enabler, not just a lender.

3. Expanding Lending into High-Risk Markets

Banks typically avoid funding exports to politically volatile or economically unstable countries. But ECI’s government-backed guarantees allow transactions in over 100 countries, including high-potential markets in Africa, Asia, and MENA.

Key advantage for banks:

• Ability to support cross-border financing for markets previously deemed too risky
• ECI’s global buyer database (400 million+ records) adds visibility and control

4. Strengthening Client Relationships and SME Portfolios

By integrating credit insurance into their lending products, banks can:

• Provide value-added solutions to clients
• Help SMEs access financing they otherwise couldn’t secure
• Build long-term relationships through strategic trade support

ECI works closely with leading UAE banks to co-structure insured solutions that make it easy to onboard exporters into protected lending frameworks.

5. Enabling ESG-Aligned and Strategic Lending

As the UAE shifts toward sustainable trade and non-oil export growth, banks have a role to play in aligning with national priorities. ECI supports this through:

• Tailored insurance for strategic sectors such as clean energy, healthcare, and food security
• Risk-sharing mechanisms that align with UAE Vision 2031

This ensures lending supports not just business growth but also national economic goals.

Conclusion: Smarter Lending Through Risk Mitigation

Trade credit insurance is more than a protection tool. It is a catalyst for smarter, faster, and safer lending. For banks in the UAE, partnering with ECI opens the door to new markets, stronger client relationships, and more confident lending decisions.

👉 Explore how ECI works with banks to enhance lending frameworks and support non-oil trade growth.