Pak EXIM adds PKR3bn SME risk pool and ICIEC reinsurance for exporters

Pakistan’s Export-Import Bank has added two layers of risk support for exporters, signing a reinsurance agreement with the Islamic Corporation for the Insurance of Investment and Export Credit while establishing an approximately PKR3bn risk pool designed to bring export credit insurance within reach of more SMEs.

The agreements were signed in Islamabad on 31 August. The reinsurance arrangement links Pak EXIM with ICIEC, the Islamic Development Bank Group’s multilateral credit and political-risk insurer. A separate agreement between Pak EXIM and Pakistan’s Export Development Fund establishes the SME Risk Pool.

The two structures address different constraints. Reinsurance allows Pak EXIM to transfer part of the risk it assumes when underwriting export credit insurance, potentially increasing the amount or range of business it can support without retaining every exposure on its own balance sheet.

The PKR3bn pool is targeted more directly at smaller exporters. Pakistan’s Finance Ministry said it will help SMEs access Pak EXIM’s Trade and Export Credit Insurance against non-payment risk, providing protection when overseas buyers fail to meet their obligations. It is therefore a risk-sharing and insurance mechanism rather than a PKR3bn direct lending fund.

Terms of the ICIEC reinsurance agreement, including maximum capacity, Pak EXIM’s retained share and whether cover will operate on a quota-share, facultative or other basis, were not disclosed. ICIEC offers several forms of reinsurance and co-insurance to export credit agencies, but the precise structure of the Pakistan agreement should not be inferred from its other programmes.

Pak EXIM president Shahbaz Hussain Syed said the ICIEC arrangement would strengthen the bank’s underwriting capacity, while the SME pool would widen access to protection against buyer default.

For Pakistan’s export-finance system, the significance lies in combining international reinsurance capacity with a domestic risk-sharing pool. Smaller exporters frequently face a double constraint: difficulty securing affordable finance and limited ability to absorb the impact of an unpaid foreign receivable.

Giving Pak EXIM more capacity to underwrite those risks can help make insured receivables more financeable while allowing exporters to pursue customers and markets that would otherwise carry an unacceptable payment risk.