The French trade credit insurer Coface expects to help more companies in the Middle East to access funding and its credit exposure in the region to rise by 30 per cent next year as projects increase.
About 60 per cent of Coface’s €7 billion (Dh27.68bn) in credit exposure in the region is in the UAE. Currently, €21bn in turnover in the region is protected by Coface.
As a trade credit insurance company, Coface helps companies to protect themselves from the risk of non-payment and it helps businesses raise funding as the company is highly rated by credit agencies. With a global database on companies, Coface can underwrite trade credit insurance across the world. In the region, it has a database of 32,000 companies.
“Ultimately we help the big corporations to reduce their cost of funding,” said Massimo Falcioni, Middle East companies chief at Coface. “We help SMEs [small and medium-sized enterprises] in two ways – to ease access to funding and to reduce the risk of bad payments and insolvency.
“We help entrepreneurs to have information and to create new drivers of development for their turnover.”
The UAE, which has the most diversified economy in the Arabian Gulf, is expected to continue with developing projects. With nearly 70 per cent of the country’s GDP coming from the non-oil sector and continued government spending, demand for trade credit is predicted to be strong.
“I think that the wise diversification strategy put in place by the UAE Government will continue,” said Mr Falcioni. “I would expect the exposure to continue to grow for the internal domestic consumption and for the re-export hub to new territories including Africa.”
In addition, more than 50 per cent of next year’s UAE federal budget spending will go to education, social services and health, another incentive for Coface to boost its business in the country, said Mr Falcioni.
While Coface provides trade credit insurance to a number of businesses in different sectors, it is particularly interested in the petrochemical and refining industry.
“With the oil slowdown, all the trade, the resellers of petrochemical products were impacted in their turnover so their margins went down,” said Mr Falcioni. “A lot of buyers, and traders, started to have low profitability and expanded their payment terms to the manufacturer of petrochemical products. This is where we can help a lot.”
Coface is keen to take part in projects that will be under Dubai’s public-private law which comes into effect this month. Such projects are expected to attract foreign direct investment as the private sector will play a bigger role in the project pipeline.
“What we are seeing is that the Government of the UAE has a pivotal role to create a fertile environment to attract foreign direct investment and facilitate trade and export,” said Mr Falcioni.
Follow The National’s Business section on Twitter