The Export Guarantee and Insurance Corporation (EGAP) is providing extraordinary aid at this extraordinary time. Since the beginning of the coronavirus pandemic, it has approved guarantees for loans totalling CZK12.1bn provided to large Czech exporters. Permanent clients started taking out insurance more often and the number of new clients is on the rise as well.
The domestic economy is driven predominantly by the performance of firms in the automotive industry. These drivers of the Czech economy – along with firms engaged in transport engineering – have turned to the EGAP, via their banks, with applications for the biggest amount of guarantees in terms of both number and value. Out of the total of CZK12.1bn worth of guarantees provided under the COVID Plus aid scheme, more than one third has been approved for companies engaged in these industries.
“We are a traditional partner of Czech exporters, and if a large number of them is engaged in the automotive industry, it is logical that this segment is also using the biggest amount of COVID Plus guarantees,” EGAP board chairman Jan Procházka said.
Now also available for transport and tourism
Loans to firms in the automotive segment amount to CZK3.3bn, which together with loans other manufacturers in the transport sector (CZK1.2bn) accounts for more than one third of all the guarantees approved. The second biggest volume of guarantees, CZK2.6bn, went to metal producers and processors, followed by guarantees worth CZK2.5bn provided to other machinery manufacturers. Since summer, the scheme has also been open for carriers and tour operators, so companies engaged in these segments joined the statistics. The guarantees approved for them amount to CZK700m.
“These are high-risk segments, which will have an influence on the total loss rate of the programme,” said Procházka. He therefore expects the number of unpaid loans which EGAP will have to cover for Czech firms to be higher than expected upon the launch of the programme.
The guarantee scheme of the COVID Plus programme was prepared by the government in cooperation with EGAP. The aim is to secure repayable aid for large Czech exporters and their suppliers. It is designated for companies with at least 250 employees whose exports make at least one fifth ot their sales. The loans can be provided in an amount ranging between CZK5m and CZK2bn. The insurance company has been receiving applications since May. So far it has approved 54 and rejected five. “Further applications are still coming and we expect their number to keep growing at an even bigger rate than so far. Only now we are starting to see how large firms are doing in terms of liquidity, hence their need of funding. The main surge is yet to come,” Procházka said.
In addition, the European Commission has enabled the EU member states to extend their anti-coronavirus schemes beyond the year 2020, when they were originally planned to end. “We are, of course, ready to provide help in the form of guarantees next year as well. We have enough people and sources for that,” Procházka added.
Triple demand for insurance of short-term loans
Demand for insurance from EGAP has grown notably among small and medium-sized enterprises this year. The pandemic has tripled the interest in insurance of short-term loans for exports to the European Union. While the entire 2019 saw 110 cases of exporters’ applications for insurance of short-term export loans, the first ten months of this year saw 366 cases.
The record-high demand is driven by the uncertainty on the market and the temporary possibility of taking out insurance for short-term loans for exports to the EU and other advanced countries such as the USA and Japan.
“Firms have become more cautious. Insurance is being taken out by companies with which we have already cooperated but there has also been a notable increase in demand by new applicants who are looking for some certainty in the uncertain period,” Jan Procházka added.
One of the means helping EGAP cope with the increased demand by clients is the KLIKNI FOR EXPORT (Click for Export) application on EGAP’s website, enabling contactless processing of an inquiry.
Distribution of billions of crowns from COVID Plus scheme so far:
|Segment||Principal (in CZK mil.)|
|Metal production, processing and casting||2,600|
|Machinery manufacturing, repairs and installation||2,500|
|Manufacturing of other transport equipment||1,200|
|Transport (carriers and pipelines)||700|