Impact study: Many export trade deals would be lost without export credit guarantees and buyer financing
According to an impact study made by researchers of Turku School of Economics at the University of Turku, Finnvera’s export credit guarantees and financing are often decisive factors in enabling Finnish enterprises to win export contracts. The largest export companies in Finland and a group of SMEs involved in exports took part in the study.
A researcher group of the University of Turku and the University of Lorraine studied the role and impact of Finnvera’s financing in their “Insights on Impact” study that was completed in late 2018. The study was commissioned by Finnvera. The large corporations in the study were Andritz, Outotec, Valmet, Wärtsilä, Meyer Turku, and Nokia.
Finnvera is a specialised financing company owned by the State of Finland and has official Export Credit Agency (ECA) status. The largest export companies use Finnvera’s services regularly in their trade. Enterprises see Finnvera as a key strategic partner in international growth and competitiveness.
– On the basis of the material collected from large corporations, it was surprising to see the major changes in their global business environment after the 2008 financial crisis, especially with regard to large turn-key deliveries. The competitive conditions of Finnish high tech enterprises have become more complex, and the significance of public providers of export financing has increased in international trade in recent years. For instance, large corporations’ participation in competitive bidding is often tied to the availability of public financing. Indeed, the availability of equal financing options when compared to international competitors was considered crucial for maintaining competitiveness, note the impact study researchers Peter Zettinig and Johanna Raitis from the University of Turku.
The research results for SMEs emphasised diverse needs for financing and the significance of financing at various stages of business.
In SMEs, the volumes of Finnvera’s financing are smaller than in large corporates, but loans and guarantees have a more direct impact on the enterprises’ possibilities of establishing themselves and promoting their business in the international arena.
The interviewees highlighted the importance of public financing especially in the “initial survival” in product development intensive sectors, for instance, and at different phases of growth and internationalisation.
– When compared to venture capital investments, public financing made it possible to keep the strategic and operational control in the company, to apply an entrepreneurial approach, to carry out long-term development and to decrease the exit risk, i.e. the selling of the company abroad. One surprising finding related to ecompanies’ credibility is the good image of the Finnish export financing institution on the international markets, especially in Asia, the researchers say.
The starting point of the study was the increase in Finnvera’s export financing authorisations and total exposures. Due to increased demand, the Finnish Parliament raised the authorisations in 2016 and 2017: to EUR 27 billion for export credit guarantees and to EUR 22 billion for export credits and interest equalisation.
