The Export-Import Bank, one of Washington's more popular agencies, has been fine-tuning its strategy for nearly a year now, and there's more to come. Partly, it's playing catch up, reflecting the steady march of changes in the private banking and insurance fields.

Several large banks have withdrawn from equipment export finance (unless the deal is sizable), and, combined with the constant consolidation of banks, that has shrunk the ranks of trade finance lenders. Ex-Im is trying to reverse this trend, and has had some success.

In the private export credit insurance sector, on the other hand, the growth has been dramatic, displacing Ex-Im Bank in much of the short-term receivables side. The bank is, therefore, working at expanding its role in those niches where private insurers are less active.

At the same time, the Washington agency is responding to the political winds, which in 2002 forced it to ratchet up its role in financing smaller exporters. For 20 years the Bank had a requirement to do at least 10 percent of its business (in dollars) with smaller firms. When its charter was renewed last year, however, Congress decided to double this "set-aside" to 20 percent.

In Fiscal 2002, small business accounted for 18 percent of Ex-Im Bank's dollar volume, and 86 percent of the number of its transactions. But when foreign demand starts to pick up, a buoyant export business by larger companies doing big equipment deals (including aircraft) could shrink the share of small business. To match a single Boeing-747 ($100 million in financing) requires a lot of smaller deals. So, Ex-Im has its work cut out to sustain a 20 percent performance.

And, then, there are Ex-Im's rivals among export credit agencies, especially those in Canada, France, Germany, and the United Kingdom, that compete aggressively on large deals. The bank is constantly watchful in this contest.

The buck stops at Ex-Im

In reshaping its strategy, the bank is pursuing the two major roles it plays. One is to help smaller and mid-sized exporters where there is a gap in the private financial marketplace. The other is to take on risks, such as Russian and African deals, that private lenders and insurers won't live with, which helps the full spectrum of exports, from food processing and packaging machinery to aircraft and power generation and telecom gear.

Its support for smaller exporters remains critical. "Ex-Im Bank is not just the bank of last resort, it's the bank of only resort for small business," says Jim Morrison, who runs the Small Business Exporters Association in Washington.

A couple of examples are illustrative. Take Southwest Windpower Inc., in Flagstaff, Arizona, which makes wind generators that charge batteries for electricity in homes, schools, and offshore oil platforms. In exporting, now 60 percent of the business, it sells through distributors, many of them small firms, in places like Brazil, South Africa, Turkey, and India.

"Ex-Im insurance enables us to offer terms that would not otherwise be possible--we couldn't take the risk ourselves," says president David Calley. And, he adds, the insurance gives banks the comfort they need to accept export receivables in the firm's borrowing base, thus helping it to access credit.

Another example is Coretest Systems Inc., in San Jose, California, which makes equipment that analyzes core samples for the oil sector. In business for 20 years, it has built up its exports to 98 percent of sales. For Coretest, Ex-Im Bank's working capital guarantees are critical when it needs financing to fill a large order, says vice president David Lynch. But it also needs short-term credit insurance in some more difficult markets such as Russia and China. "In Russia, Ex-Im carries political clout that makes a difference for us," says Lynch.

Ex-Im Bank has also been reworking its operations through bolstering outreach to its users and delivery system, program adjustments, a recent reorganization, and using the Internet to automate several activities.

Speeding up its processing time in approving transactions is a high priority, says senior vice president Jeffrey Miller. Over the years, a slow response to applications and a case backlog have generated complaints. That is now being tackled in a very public way, and the plan is to bring 80 percent of applications to a decision in 20 business days. And, Miller stresses, while small business support is a must, attention to delivering a competitive service to larger exporters and larger deals is also a major thrust.

High on the bank's agenda is expanding its outreach. Ex-Im Bank relies on commercial banks and finance companies, as well as insurance brokers, to deliver its programs. Lenders provide the funds, with Ex-Im taking the risk through its guarantees and insurance. Agency officials say they are making progress in bringing more lenders into the fold. Compass Bank in Houston and Plus International Bank in Miami, as well as finance companies iTrade Finance in Houston and Export Capital Funding in Miami, for example, have recently made exports a priority.

Brokers arrange a major part of its insurance transactions, while 30 state governments have helped smaller firms work with its programs. With the states facing a severe budget squeeze, however, their export programs have already become a casualty. But Ex-Im thinks it can expand the ranks of brokers, in which some 30 firms, mostly small specialists, now do nearly all of the business. Bank officials say they have made headway lately in bringing more of them into the field, and they are developing incentives to support the trend.

The agency would like to see more associations play a part in generating business. In one fresh initiative, the Small Business Exporters Association is now working with two banks to deliver the financing, with Ex-Im Bank programs, and an export finance professional to process the deals.

In New York, at the Private Export Funding Corporation, which provides a secondary market for Ex-Im--guaranteed and insured obligations, plans are afoot to make it easier for lenders to tap its resources. In one arrangement, it will give lenders a commitment to buy their loans so they, in turn, can make a parallel commitment to exporters. The latter will be able to confidently market their ability to offer financing.

Spicing up Ex-Im's programs

Ex-Im Bank has been revamping several of its programs to encourage more transactions. Its multi-buyer insurance policy has been made more flexible in shaping how much of an exporter's portfolio is covered and how much is excluded. In defining the "basket of risk," Ex-Im is now letting the policyholder exclude safer countries and safer corporate buyers.

Furthermore, it is packaging its working capital guarantee and multi-buyer insurance programs as a single coverage, which makes it easier to apply and lowers the cost to the exporter.

In October 2002, the bank reorganized itself to reflect these priorities. A Small and Medium Enterprise Division was created to house both working capital and short-term insurance programs. A Trade Finance and Insurance Division was also established to offer the medium-term guarantee and insurance programs in a single place, while a single underwriting "culture" in evaluating risk has been established.

Finally, Ex-Im will be moving ahead in its automation efforts, which were suspended for six months. This will mean enhanced use of the Internet to communicate with exporters, lenders, and brokers in applications, which is already in place, as well as automating the actual underwriting decisions in a portion of its transactions. One of its major competitors, Export Development Canada in Ottawa, has been doing so for several years. Automation will be high on Ex-Im's plate for the next year.