With the Zimbabwean economy opening up and new possibilities for trade emerging, Zimnat has established a specialist division offering trade credit insurance to cover the risk of payment default that a trader supplying goods on credit faces.
The new stand-alone division also offers surety bonds and guarantees.
Trade credit insurance protects traders who supply goods or services on credit against the risk of payment default. Zimnat’s trade credit insurance is available to protect against such default in respect of both local and foreign trade.
The General Manager of Zimnat’s Trade Credit, Bonds and Guarantees Division Shepherd Tembo, said the division hoped to facilitate exports through the trade credit insurance it offered.
“The division expects to promote and facilitate international trade through export trade credit insurance, which will give local companies the confidence to export to different international markets, knowing that the risk of non-payment is offset by the insurance cover they have.
“Because Zimnat will be taking over that risk, it obviously has to undertake due diligence and thoroughly vet the companies that are being supplied with goods on credit.
“That means that the company taking out the insurance policy has the added benefit of a free vetting service. Often such vetting, particularly when it is of a company abroad, is costly,” he said.
He added that the insurance would also be useful to exporters seeking a bank loan to finance their exports. Where a bank loan was involved, the insurance provided the bank too with some protection.
One of the barriers there had been to the growth of companies’ operations and the country’s economic development had been lack of access to credit, he pointed out.
Companies taking out trade credit insurance did not have to worry about debt collection, in the event of default, as Zimnat would take care of recovering the money from the debtor, he said.
Mr Tembo said the new division, which is staffed by experienced trade credit insurance and surety bonds and guarantees experts, intended to remodel the way trade credit insurance and suretyship are transacted in Zimbabwe through tailoring what otherwise would be generic products to suit particular circumstances in order to facilitate trade and unlock value.
Domestic Credit Insurance is available to local suppliers to cover the risk of non-payment when they offer trade credit to local companies.
Export Credit Insurance covers the risk of non-payment when exporters offer trade credit to foreign buyers.
Zimnat offers Supply Chain Finance Credit Insurance, also knowns as Reverse Factoring, to trade finance companies or the trade and finance department of a bank that is willing to settle supplier invoices in advance before the invoice payment due date.
“In this way the insurance provides suppliers with access to advantageous financing facilities by leveraging on the buyer’s stronger credit rating,” Mr Tembo said.
Zimnat also offers Services Credit Insurance against the risk of payment default by a service provider’s customers.
It offers Receivable Purchaser of Trade Finance Credit Insurance to trade financers and banks when they provide invoice discounting and debt factoring services. This covers the risk of payment default posed by the underlying debtors on factored or discounted invoices.
Zimnat’s Trade Credit, Bonds and Guarantees Division also offers Salary Based Loans Insurance to financial institutions providing consumer finance to salaried individuals and Lease Finance Insurance to leasing institutions and banks providing asset finance and leasing services.
The division offers trade facilitation bonds as well. These are bonds and guarantees requested by suppliers of goods and commodities when they extend deferred payment terms to traders under a trade-related contract or by purchasers who advance payments to suppliers under a supply contract.
These Performance or Advance Payment Bonds guarantee the successful execution of the underlying trade contracts by the traders or suppliers.
The division also offers Surety Bonds and Guarantees to assist prospective clients within the construction, shipping and freight forwarding sectors as well as estate executors and administrators in conducting their business, by providing the necessary bonds and guarantees required by those engaging or considering contracting them.