Export credit insurance is still taking off in Cambodia, but more companies are beginning to take advantage of it, a senior executive from Forte Insurance Company said yesterday.
Youk Chamroeunrith, the managing director of Forte Insurance, one of the largest general insurance companies in the country, told Khmer Times that export credit insurance will push businesses to invest more in exporting as they will be protected from payment defaults and credit risks such as bankruptcy by buyers.
“First, is the security of the goods,” he said. “Secondly, the insurance can be used as collateral for a bank loan to ensure their sustainability.”
Forte has six companies registered for credit insurance, mostly in the agriculture and textile sectors – Cambodia’s major export industries.
Forte has access to a database of 115 million companies worldwide and insurance can cost up to tens of thousands of dollars, depending on the merchandise being exported.
In one current case, it appeared that an agricultural exporter would not be paid by the customer, so Forte has reserved $60,000 for their client, he said.
The CEO of the Battambang Rice Investment Company, Kan Kunthy, told Khmer Times his company had used Forte for two years, insuring its exports to the European Union, the US and other countries.
Ï am using this service for security in case my client cannot pay for the goods after receiving them and the insurer will look after it. We can give our customer one month or more to pay,” he said.
“Credit Insurance is good and secure, in case the customer cheats or won’t pay for our cargo and it lets us extend the payment deadline.”
Garment Manufacturers Association in Cambodia (GMAC), deputy secretary-general Kaing Monika, told Khmer Times the association’s members rarely had problems with payment because there buyers were generally major companies and long-term customers.
“In general, for Cambodia, our buyers are big companies and they have a long term relationship with our manufacturers,” he said. “Therefore, there is no concern about payment.
“Insurance is good to keep us safe but until the cost of insurance is affordable – everything is related the cost,” Mr. Monika said.
According to the data from the National Bank of Cambodia, merchandise exports increased by about 14 percent to $8.5 billion in 2015. Shipments of garments and footwear, which comprise 70 percent of total exports, rose about 10.2 percent.
So Phonnary, executive vice-president of Acleda Bank, told Khmer Times that that trade finance and trade credit play an important role to secure business.
“If customers purchase the export trade credit insurance from an insurance company, they can also get a loan from Acleda because the insurance is a reliable asset and if we trust the insurance company it can cover up to 100 percent of the loan,” she said.