UNITED REPUBLIC OF TANZANIA MINISTRY OF FINANCE
EXPORT CREDIT GUARANTEE SCHEME
POLICY AND OPERATIONAL GUIDELINES, 2003.
EXPORT CREDIT GUARANTEE SCHEME (ECGS) POLICY AND OPERATIONAL GUIDELINES, 2003. PART I PRELIMINARY 1 MISSION The mission of Scheme is to support development of financing infrastructure in the economy that improve credit environment in order to support exporters with viable export business, but lacking adequate collateral to secure bank financing. 2 OBJECTIVES The Scheme seeks to promote economic development in general by encouraging high value exports such as horticulture and floriculture and value added exports that will generate high level of employment and foreign exchange earnings. To achieve the above mission, the Scheme fulfills the following broad objectives 2.1 Economic growth- Annual export growth of 25% to be in commensurate with GDP growth rate of 8-10% needed to reduce poverty by 50% by year 2015 as provided in the Vision 2025. 2.2 Export Diversification- This would be done by improving product mix by increasing the share of high value exports, horticulture and floriculture products, level of transformation by increasing the share of manufactured products and reduce market concentration by seeking alternative markets
2.3 Employment Creation- This would be done through providing labour intensive employment and productivity. 2.4 Financial Deepening- This would be achieved by increasing the share of financial assets to GDP, that ensures broad export financing and credit facilities e.g structured finance/loan syndication, risk diversification/sharing, this would result into rapid increase in exports. 2.5 Innovative management of domestic liquidity The accumulated deposits of the banking sector could be used to support or facilitate export projects that would promote growth thereby increase the country’s absorptive capacity, and expand the country’s internal economy. 2.6 Promoting Corporate Integrity- Awareness and training that would induce both financial planning, tax compliance and good corporate governance standards. 3 INSTITUTIONAL SET UP OF THE SCHEME The Government assigned the development and implementation of the Scheme to the Bank of Tanzania under Agency Agreement pending the formation of a fully-fledged Export Credit Guarantee institution. 4 DEFINITIONS For the purposes of this Policy unless the context otherwise provides; “Approved amount” means the amount guaranteed by the Scheme “Borrower” means a natural or juridical person which shall include but not limited to sole proprietorship, partnership, corporation or limited liability company which; (i) (ii) (iii) (iv) is privately owned, controlled and operated in Tanzania; is organized and authorized to conduct business in Tanzania; and is engaged in production and export of goods and services from Tanzania it has been granted a credit facility by the financing institution related to export production or pre-shipment or post-
shipment finance on which the financing institution seeks a guarantee cover for such facility. “Charge” means any mortgage, deed of trust or other security agreement by which property is encumbered or otherwise charged and which shall be shared on a prorata basis by the scheme with the financing institution. means a written demand on the Scheme by a Participating Financial Institution (financing institution) for payment under the Guarantee in accordance with the terms of the Master Guarantee Agreement means the date on which the borrower defaults under the guaranteed credit facility granted by the financing institution. means a payment made by the Scheme with respect to a Claim
“Claim Payment Date” means the date on which the Scheme makes a Claim Payment “Collateral” may be used interchangeably with the term “security” to mean the asset, right, or interest pledged, assigned, mortgaged or in any manner hypothecated to secure the repayment of a credit facility obligation and which is shared on a pro rata basis by the Scheme with the financing institution. means the documents, with respect to the Credit Facility Agreement and any other instruments executed by the Borrower relating to the Credit Facility means a credit facility granted by a financing institution in favour of a Borrower for the purpose of providing an export production, pre shipment or post shipment export credit in support of a specific export transaction.
“Credit Facility Agreement” means the agreement entered between the financing institution and the Borrower in respect to the Credit Facility. “Due Date” “Expiry Date” means the repayment date(s) for the repayment of the credit facility. means the expiration date of the credit facility issued to a borrower by a financing institution.
“Eligibility Requirements” means requirements relating to transactions eligible for a Guarantee under the Scheme and which contain the terms and conditions set forth in Form ECGS 1 of this Agreement. “Forms” means collectively the annexes or forms applicable to the Scheme as; Form ECGS 1 Form ECGS 2 Form ECGS 3 Form ECGS 4 Form ECGS 5 Form ECGS 6 Form ECGS 7 Form Form Form Form Form Form “ECGS Fund” ECGS ECGS ECGS ECGS ECGS ECGS 8 9 10 11 12 13 (Eligibility Requirements); (Application for ECGS); (Confirmation of Receipt of Application); (Guarantee Application Rejection Notice)); (Notice of Guarantee Acceptance); (Guarantee Certificate), (Monthly report on Performance of Guaranteed Facility); (Early Warning Notice) (Notice of Default) (Discharge/Termination Notice); (PFI Claim Form). (Claims Approval Notice) (Claims Rejection Notice).
means the Fund of the Scheme.
“Early Warning” means an alert sent to the Scheme by the financing institution in the event the Borrower does not satisfactorily service the guaranteed credit facility.
“Export Production Finance” means the credit facility to producers; manufacturers or suppliers to obtain finance against firm export commitment. “Extended expiry date” means the extended expiration date of the credit facility issued to a borrower by a financing institution and agreed by the Scheme.
“Financing Institution” means a financial institution or a bank as defined under Banking and Financial Institution Act 1991. “Guarantee Cover” means with respect to a Credit Facility, unless otherwise determined by the Scheme, a maximum of eighty five percent (85%) eighty per cent (80%) and seventy-five percent (75%) for export production finance, pre-shipment finance and post-shipment finance respectively of the guaranteed credit facility by the Scheme. “Insolvency” means the liquidation or dissolution of the Borrower’s business and includes the following. a resolution is passed to wind the borrower up or a winding up order is made. an administrator is appointed or an adminioatration order is made. “Master Guarantee Agreement” (MGA)” means an agreement between the Scheme and financing institutions. In relation to the operations of guarantee covers issued by the Scheme “Participating Financial Institution (financing institution)” means a financial institution or a bank as defined under Banking and Financial Institution Act 1991that participates in the Scheme.
“Post-shipment Finance” means a credit facility granted by a financing institution to an exporter against expected export proceeds, “Pre-shipment Finance” means a pre-shipment credit facility granted to an exporter by a financing institution for the purpose of purchasing, manufacturing, processing or packaging of goods for export, against firm orders. “Protracted Default” means a lengthened or extended duration in the repayment of the loan by the Borrower for more than ninety days (90) days from due date. “Release and Assignment Agreement” means a release and assignment agreement executed by the financing institution in favour of the Scheme in form and substance satisfactory to the Scheme. “Risks Covered ” means the risks that are covered by the guarantee issued by the Scheme. “Risks not covered ” means the risks that are not covered by the guarantee issued by the Scheme. “Risk Sharing” means unless otherwise determined by the Scheme, a minimum of twenty-five percent 25% for post shipment, 15% for pre-shipment and 20% for export production shall be assumed by the financing institution in the Guaranteed Credit Facility.
“Release and Assignment Agreement” means a release and assignment agreement executed by the financing institution in favour of the Scheme in form and substance satisfactory to the Scheme. “The Scheme” means Export Credit Guarantee Scheme (ECGS);
“Specified account” means the account opened by the financing institution for the purposes of accounting of claim payments received from the Scheme and recoveries from the Borrower related to the guaranteed credit facility.
PART II POLICY GIUDELINES 5 GUARANTEES COVERED UNDER THE SCHEME 5.1 Timely and adequate credit facilities, at the pre-shipment as well as postshipment stage, are essential for exporters to realise the full export potential. Exporters may not, however, be able to obtain such facilities from the financing institutions for several reasons e.g (i) The exporter may be relatively new to export business (ii) The extent of facilities needed by the exporter may be out of proportion to the equity of the firm or (iii) The value of collaterals offered by the exporter may be inadequate 5.2 The government has designed a scheme of guarantees to financing institutions with a view to enhancing the creditworthiness of exporters so that they would be able to secure better and larger facilities from the financing institutions. The scheme seeks to achieve this objective by assuring the financing institutions that, in the event of an exporter failing to discharge liabilities covered by the Scheme to the financing institutions and thereby making the financing institutions incur a loss, the Scheme would make good a major potion of the financing institutions’ loss. The financing institution would be liable to the remaining loss. Any amount recovered from the exporter subsequent to payment of claims shall be shared between the scheme and the financing institution in the same ratio in which the loss was borne by them at the time of settlement of claim. 5.3 To meet the varying needs of exporters the Scheme has evolved the following types of guarantees to protect financing institutions against non-payment by exporters due to insolvency or protracted default.
(i) (ii) (iii) (iv)
Pre-shipment Credit Guarantee. Export Production Credit Guarantee Post-shipment Credit Guarantee Export Performance Guarantee.
5.3.1 Pre-shipment Credit Guarantee It is a guarantee issued to a financing institution in consideration of the financing institution advancing pre-shipment credit facility to an exporter for purchasing, manufacturing, processing and packing of goods meant for export against a letter of Credit/Confirmed/firm Order. The guarantee is issued for a maximum period of 270 days against a application made for the purposes and covers the advances that may be made by the financing institution during the period given to the exporter within an approved limit. The guarantee cover shall cease to be effective either once the goods are shipped or after the lapse of the said 270 days. The delivery of documents evidencing exports of goods for which the financing institution had given the pre-shipment credit facility shall be deemed to be the payment by the exporter to the financing institution and the liability of the Scheme for the preshipment credit facility shall cease on such delivery. Thereafter the liability has to be transferred by the financing institution to the postshipment credit guarantee facility and subject to the financing institution preserving recourse against the exporter, the liability can be covered under the post-shipment credit guarantee. 5.3.2 Export Productions Credit Guarantee. It is a guarantee issued to a financing institution in consideration of the financing institution advancing export production credit facility at pre-shipment stage to a supplier/producer/manufacturer of goods against firm contract or agreement of sale with an exporter. The guarantee is issued for a period based on the duration of the credit facility against a application made for the purposes and covers the advances that may be made by the financing institution during the period given to the exporter within an approved limit. The guarantee cover shall cease to be effective either once the goods are shipped or after the lapse of the said duration as stipulated in the guarantee certificate, thereby the Scheme shall not be liable for any claim arising out of the guarantee.
5.3.3 Post-shipment Credit Guarantee It is a guarantee issued to a financing institution in consideration of the financing institution advancing post-shipment credit facility to an exporter to enable him receive advances against expected export proceeds for continuity of export transactions and replenishment of working capital. The guarantee is issued for a maximum period of 60 days against a application made for the purposes and covers the advances that may be made by the financing institution during the period given to the exporter within an approved limit. The guarantee cover shall cease to be effective after the lapse of the said 60 days; thereby the Scheme shall not be liable for any claim arising out of the guarantee. 5.3.4 Export Performance Guarantee. This is a counter guarantees offered by the Scheme to financing institutions to cover loss in connection with the financing institutions issuance of Bid Bond, Performance Bonds, Advance Payment Bonds and guarantees in lieu of retention of money. Related to the exporters participation in export business upon which there is a requirement to execute bonds duly guaranteed by the financing institutions. The guarantee is issued for a maximum period of 270 days against a application made for the purposes and covers the advances that may be made by the financing institution during the period given to the exporter within an approved limit. The guarantee cover shall cease to be effective after the lapse of the said 270 days; thereby the Scheme shall not be liable for any claim arising out of the guarantee. 6 WHOLE TURNOVER GUARANTEE It is a contract between the Scheme and the financing institution where the financing institution is required to submit or declare all its export clients to the Scheme and the Scheme will decide which export transaction it will guarantee. The Whole Turnover Guarantee covers both pre-shipment and post shipment finance, for the duration of 360 days. 7 ELIGIBILITY
7.1 Financing institutions may be eligible to participate in the Scheme provided they meet the eligibility requirements (Form ECGS 1) appended to this Policy. 7.2 A financing institution seeking to participate in the Scheme shall be required to (make a proposal for the type of facility offered by the scheme in the prescribed form) enter into the Master Guarantee Agreement/Whole Turnover Guarantee with the Scheme. 7.3 A financing institution shall undertake to abide by the eligibility requirements appended to this policy and the operating guidelines 8 SCOPE OF THE GUARANTEE 8.1 The maximum guarantee cover shall be, unless otherwise determined by the Scheme, as follows, unless otherwise determined by the scheme; (i) Pre-shipment Credit Guarantee. (ii) Export Production Credit Guarantee (iii) Post-shipment Credit Guarantee (iv) Export Performance Guarantee 80% 85% 75% 75%
8.2 Any change in the terms and conditions of guaranteed credit facility shall only become effective upon obtaining the approval of the Scheme. 9 DURATION OF GUARANTEE 9.1 The maximum period of the guarantee cover shall be, unless otherwise determined by the Scheme, as follows; (i) Pre-shipment Credit Guarantee. (ii) Export Production Credit Guarantee (iii) Post-shipment Credit Guarantee (iv) Export Performance Guarantee 270 days 270 days/or * 60 days 270 days
* In the case of export production finance the duration of the guarantee will correspond to the duration of the guaranteed credit facility.
10 GUARANTEE FEES 10.1 Financing institutions shall pay a non-refundable guarantee fee to the Scheme, during the issuing and renewal of the guarantee, unless otherwise determined by the Scheme, as follows; (i) Pre-shipment Credit Guarantee. (ii) Export Production Credit Guarantee (iii) Post-shipment Credit Guarantee (iv) Export Performance Guarantee 1% 1.5% 0.75% 0.75%
10.2 The above fees apply to the total contingent liability of the scheme at the time of issuing the guarantee and it is subject to review from time to time by the Scheme. 10.3 These fees apply for credit facilities that do not exceed 360 days, in case of medium to long-term credit facilities; applicable guarantee fees shall be charged 1% per annum on the subsequent years and would continue for the duration of the guarantee. 11 CURRENCY OF THE SCHEME The guarantees shall be issued in Tanzanian shillings and claims shall also be settled in Tanzanian Shillings. 12 RISKS COVERERD 12.1 The Scheme covers the financing institution against failure of the borrower to repay the guaranteed credit facility due to; (i) (ii) Insolvency of the exporter or, Protracted default of the exporters.
12.2 For avoidance of doubt the scheme shall not cover the following risks ; (i) Political Risks a. Imposition of restrictions by the Government of the buyer’s country or any Government action, which may block or cause the delay of transfer of payment made by the buyer. b. War, civil war, revolution or civil disturbances.
c. New exchange restrictions or cancellation of valid import licenses. d. Expropriation by a government on the borrower or buyers property or assets that cause the delay of transfer of payment made by the buyer. e. Any other related to political risks. (ii) Other Risks a. Exchange rate fluctuation b. Commercial disputes. c. Causes inherent in the nature of the goods e.g. perishables. d. Loss or damage to goods, which can be covered by general insurers. e. Force Majeure (Acts of God) 13 EARLY WARNING OF UNSATISFACTORY PERFORMANCE 13.1 In the event the financing institution notices that the Borrower does not service the guaranteed credit facility satisfactorily, the financing institution shall submit to the Scheme an Early Warning Notice in the prescribed Form ECGS 8 that alerts the Scheme on the adverse circumstances observed with respect to the guaranteed credit facility and requires the financing institution to aggressively follow up the Borrower to ensure that the guaranteed credit facility is serviced. 13.2 Financing institution shall submit to the Scheme fortnightly reports detailing the measures taken to ensure that the guaranteed credit facility is serviced appropriately. 14 NOTICE OF DEFAULT 14.1 If an overdue guaranteed credit facility is not liquidated within 2 months of the due date or the extended due date, it would need to be classified as being in default and reported as such. this notice of default (form……) has to be submitted to the scheme within 1 month from the date of calling up of the overdue guaranteed credit facility by the financing institution or within 2 months from the due date or the extended due date as the case may be. 14.2 However, there may be cases where the financing institution may feel that the accounts are basically sound and this need not cause any anxiety. If in such circumstances, the financing institution proposes to continue giving advances, the reasons for the same should be clearly
explained in the Notice of Default and the Schemes’ prior approval for such advances should be taken. In such an event the Scheme will carefully consider the financing institution’s proposal for a suitable nursing programme as per details indicated in the succeeding sections. 15 NURSING PROGRAMME 15.1 Exporters who have defaulted in adjusting the pre-shipment or post shipment finance may sometimes approach the financing institutions for fresh pre-shipment or post shipment finance, with the promise that they would repay overdue out of the profits expected from the business that would be handled with the help the fresh pre-shipment or post shipment finance. If the financing institution is satisfied that such a nursing programme is workable and that it offers the best chances of recovering the overdue, it should submit its detailed nursing programme to the Scheme for approval. The application should contain the following particulars (i) (ii) (iii) (iv) (v) (vi) (vii) Grounds on which the financing institutions feels that the proposed further assistance would enable the exporter to generate enough profit to pay over due advances. The time with in which the nursing programme would succeed Financial position of the exporter and the net worth of the proprietors /partners/directors The amount of overdue advances in relations to business turnover of the exporter Position of export orders and hand and prospects of further export orders The manner in which the exporters proposes to liquidated the overdue advances Viability of the programme
15.1 Any nursing programme agreed to and implemented by the financing institutions without the approval of the Scheme would not be binding on the Scheme and it may provide sufficient reasons for the Scheme to reject any claim relating to the account. 16 MONITORING OF NURSING PROGRAMME Once the Scheme approves a nursing programme, the concerned account will be delinked from the whole turnover guarantee. A separate preshipment credit guarantee will be issued and two separate monthly
declarations, one for the blocked account and the other for the new preshipment credit account will have to be submitted. The idea behind this procedure is to enable the financing institution as well as the Scheme to closely watch the progress of the nursing programme and to institute such action as may be necessary to keep the programme on course. 17 SUBMISSIONS AND SETTLEMENT OF CLAIMS 17.1 Submission of Claim Where a financing institution has complied fully to the conditions related in sections 13 and 14 above but the borrower has failed to service the guaranteed credit facility satisfactorily and sixty (60) days have lapsed after submission of the Notice of Default a financing institution may file a claim under the guarantee. The financing institution shall also submit evidence to the Scheme at the time of making a Claim that it has undertaken and/or is in the process of taking, such efforts for recovering the guaranteed credit facility. 17.2 Documents to be submitted for the claim The financing institution shall submit along with the claim the documents prescribed in the Claim Form The financing institution shall also submit a letter of undertaking to certify that there has been no act of inter alia irregularity in the circumstances leading to the filing of the claim in the prescribed Form. 17.3 The waiting period for settlement of a claim The waiting period for settlement of a claim shall be as follows; (a) Where the loss is due to insolvency, unless otherwise agreed to in writing by the Scheme, immediately after the expiry of the two months from the date the Scheme receives the claim or one month after the loss has been admitted to rank against the insolvency estate in favour of the financing institution in any insolvency proceedings.
(b) Where the loss is due to protracted default immediately after the expiry of two months from the date the Scheme receives the claim. 17.4 Payment of Claims After examining a claim and obtaining necessary clarifications from the financing institutions, the Scheme decides whether or not to pay the claim. If the claim is payable the remittance is made by cheque which is forwarded to the financing institution with a covering letter containing following:(i) The ratio in which amount recovered is to be shared (ii) Request to the financing institution to send an acknowledgment of receipt for the remittance 17.5 Action after payment of claim The payment of claim by the Scheme under the guarantee does not in any way take away the responsibility of the exporter to repay the entire amount of outstanding to the financing institution. The financing institutions should maintain its recourse to the exporter for the full amount owed by him and effective action for recovering the amount, including such actions as may be suggested by the scheme, including legal proceedings should be initiated against the exporter or such other person including the oversees buyer against whom such action can be taken. 17.6 Sharing of Recovered Amount. All amounts recovered after payment of claim by the scheme are to be shared between the scheme and the financing institution in the ration in which the loss admitted by the scheme was borne by them. Therefore, the financing institution should give the scheme details of every amount recovered promptly after its recovery and remit the Scheme’s share immediately. The financing institution are liable to pay interest to the Scheme at 5% over the prevailing lending rate if the amount are not appropriated within fourteen (14) days from the date of recovery. 17.7 Writing off bad debts (Insolvency)
If the financing institution (in a case where the Scheme has paid a claim) considers that the whole or part of the amount due from the exporter cannot be recovered, the facts and circumstances of the case should be reported to the Scheme. If the Scheme agrees to the financing proposal, it will convey its decision in writing and the amount could be written off by the financing institution. 17.8 Treatment of the Specified Account (i) Any amount received from the Scheme by the financing institution in payment of a claim should not be credited to the account of the borrower who shall remain liable to the financing institution for his indebtedness as if no guarantee had been furnished. The borrower whose account is covered by a guarantee under the scheme is not entitled to any benefit out of the claim under the guarantee. The financing institutions should, therefore, credit the amount received from the Scheme towards any claim under a guarantee to a Specified Account.
18 SPECIFIC APPROVAL LIST 18.1 The Scheme shall maintain a Specific Approval List (SAL) and shall be circulated among all financing institutions as an important source of information for identifying exporters/borrowers who have defaulted. The list is mainly aimed at advising financing institutions to exercise caution while dealing with such exporters. 18.2 Financing institutions should also volunteer to maintain information on bad borrowers which should share with the Scheme 18.3 Need for placing an exporter in SAL
The necessity for placing an exporter in SAL may arise in cases where; (i) An exporter has defaulted to a financing institution (ii) A claim has been filed under a guarantee on account of the exporter by any financing institution. (iii) The exporter is purported to be involved in a fraud. (iv) The exporter is in financial difficulties. 18.4 While placing the name of an exporter under SAL the Scheme may also consider including the related parties as the financial difficulties of the exporter by adversely affecting their financial position as well. Names of proprietors/partners and guarantors/directors are also included in SAL with a view to prevent them from obtaining finance in the names of some other concerns floated by them. 19 REPORTING REQUIREMENTS 19.1 The following reports shall be submitted; (a) To the Scheme by the financing institution; (i) Monthly reports on Form ECGS 7 detailing sanctions, disbursements, repayments, outstanding amount and expiration of the credit facility. (ii) Fortnightly reports of steps taken and details of recoveries made. (iii) The financing institution shall obtain and make available to the Scheme, upon request by the Scheme any other relevant information on the Borrower. (iv) The financing institution shall forthwith notify the Scheme, of any matters that may adversely affect the ability of the Borrower to meet its obligations under the Credit Facility Agreement. (v) Notwithstanding the generality of the foregoing, the Scheme, may request for submission any other report or information from the financing institution on the operations and performance of the guaranteed credit facility, at such intervals or frequency as may be required by the Scheme. (b) To the Ministry of Finance by the Scheme; Monthly reports and statement of affairs as provided in the Agency Agreement between the Government and the BOT.
20 ECGS FUNDS. The following are the sources and uses of the Fund of the Scheme; 20.1 Sources of the Funds (i) (ii) (iii) (iv) (v) 20.2 Contributions from Government, Bank of Tanzania and Private Sector Grants and loans Guarantee fees Income from Investments Any other source as may arise out of and in connection with the operations of the Scheme
Uses of Funds (i) (ii) (iii) Settlements of claims. Operational expenses. Any other use as may arise out of and in connection with the operations of the Scheme.
21 MISCELLANEOUS 21.1 In respect of any matter not specifically provided in this Scheme, the Scheme may make such supplementary or additional provisions as may be necessary. The Scheme reserves the right to modify, or replace this policy, provided that the rights or obligations of financing institutions on the existing guarantees shall not be affected by the modification, or replacement of the policy. The financing institution shall insert in the Credit Facility Agreement a provision under which the Borrower grants to the financial institution a valid and enforceable Charge on any Collateral, which provision shall require a first security interest in the assets being financed.
PART III 22 OPERATIONAL GUIDELINES 22.1 Applications for guarantees shall be made by financing institutions in the prescribed Form ECGS 2 as provided in the Master Guarantee Agreement All applications for guarantees shall be made by the head offices of the financing institution. Application forms shall be duly completed. Along with the applications financing institutions shall forward project/business plan, loan agreement, credit assessment audited financial statements and any valid export contract. If the Schemes approves the guarantee application the financing institutions shall be required to pay a non-refundable guarantee fee stipulated in the Master Guarantee Agreement , thereby the Scheme shall issue a guarantee certificate. The maximum guarantee cover shall be, unless otherwise determined by the Scheme, as follows; (i) Pre-shipment Credit Guarantee. (ii) Export Production Credit Guarantee (iii) Post-shipment Credit Guarantee (iv) Export Performance Guarantee 22.6 80% 85% 75% 75%
When the credit facility is sanctioned after the date of issue of the guarantee, the financing institution shall inform the Scheme the date on which such facility has been availed. A guarantee shall become void if no disbursement is made within 30 days from the date of issue. Where the credit facility issued by a financial institution is discontinued, the financing institution shall immediately notify the Scheme whereupon the guarantee shall cease forthwith. The liability of the Scheme in respect of guaranteed credit facility shall end as and when the effectiveness of the guarantee ceases due to any of the following circumstances:
(i) (ii) (iii) (iv)
The borrower has submitted valid shipping documents to the financing institution in case of pre-shipment credit facility. Expiry Failure by the financing institution to disburse the guaranteed credit facility within 30 days from the date of issue. Discontinuation of the guaranteed credit facility by financing institution.
22.10 Financing institutions shall operate the guaranteed credit facility in accordance with the requirements of prudential regulations issued by the Bank of Tanzania from time to time, and bring to the notice of the Scheme any adverse features noticed by them. 22.11 The guarantee shall come into effect on the date of its issue, and unless earlier terminated will remain operative for the period indicated in the guarantee certificate. 22.12 Financing institutions shall pay a non-refundable guarantee fee to the Scheme, during the issuing and renewal of the guarantee, unless otherwise determined by the Scheme, as follows; (i) Pre-shipment Credit Guarantee. (ii) Export Production Credit Guarantee (iii) Post-shipment Credit Guarantee (iv) Export Performance Guarantee 1% 1.5% 0.75% 0.75%
22.13 Any guaranteed credit facility not repaid or adjusted on the due dates should be classified as “watch” and reported to the Scheme. While this will be in the nature of Early Warning, participating financing institution seeking to invoke guarantees in respect of such accounts should file claims in accordance with the provisions of the Master Guarantee Agreement. 22.14 Claims shall be submitted by the head office of the financing institution in the prescribed Form ECGS 10. 22.15 Where the claim is approved the amount payable in respect of the guaranteed credit facility shall be on the contingent liability amount subject to review from time to time by the Scheme as follows; (i) Pre-shipment Credit Guarantee. (ii) Export Production Credit Guarantee (iii) Post-shipment Credit Guarantee 80% 85% 75%
(iv) Export Performance Guarantee
22.16 Any amount received from the Scheme by the financing institution in payment of a claim should not be credited to the account of the borrower who shall remain liable to the financing institution for his indebtedness as if no guarantee had been furnished. The borrower whose account is covered by a guarantee under the scheme is not entitled to any benefit out of the claim under the guarantee. The financing institutions should, therefore, credit the amount received from the Scheme towards any claim under a guarantee to a Specified Account. 22.17 The financing institution shall, in respect of the guaranteed credit facility for which a claim has been paid, be responsible for recovering the debt and in so doing exercise the same diligence in recovering from the Borrower the amount due in all the ways open to it as if no guarantee had been issued for the purposes of recovering the amount in accordance with the provisions of the Management of Risk Assets Regulations, 2001. 22.18 The financing institution shall submit to the Scheme fortnightly reports detailing all debt recoveries made. 22.19 Any debt recovered after payment of a claim will be shared between the concerned financing institution and the Scheme in the proportion in which the loss has been borne.
PART IV SCHEDULES Form ECGS 1 ELIGIBILITY REQUIREMENTS The following are the basic Export Credit Guarantee Scheme eligibility requirements that must be observed for all transactions unless amended by the Scheme: 1. Eligibility for Participation 1.1 Financial Institution Eligibility requirements for participation of a financial institution are as follows: 1.1.1 Be a licensed financial institutions as per the Banking and Financial institutions Act, 1991. 1.1.2 Be adhering to the prudential requirements issued by the Bank of Tanzania from time to time 1.1.3 Apply to the Scheme and upon acceptance enter into a Master Guarantee Agreement with the Scheme 1.1.4 Be granting credit facilities to exporters relating to export production or pre-shipment, or post shipment of exports of goods and services, priority being given to high value and value added exports from Tanzania. Request of guarantees must be related such export financing. 1.2 Borrower Eligibility requirements for a borrower, are as follows:1.2.1 Be a registered Tanzanian natural or juridical person that is privately owned, controlled and operated in Tanzania and is engaged in production and export of goods and services from Tanzania. 1.2.2 Has viable commercial projects, which are the basis of requesting the credit facility 1.2.3 Has applied for a credit facility from a financial institution relating to export production or pre-shipment or post
shipment finance on which the financial institution has sought a guarantee cover from the Scheme. 1.3 Eligible Credit Facilities The following credit facilities are eligible for cover under the guarantee; 1.3.1 Advances granted against firm export orders 1.3.2 Advances granted to supplier/producer/manufacturer of goods against firm contract or agreement of sale with an exporter. 1.3.3 Advances granted in respect of deemed export transactions 1.4 Eligible Products Eligible products are Tanzanian exports of goods and services, priority being given to high value and value added exports 2. Originality A minimum Tanzanian content rule must be met, in accordance with WTO Rules of Origin criteria. If the Originality is questionable the Scheme shall require the Borrower to complete Exhibit 2 of Form ECGS 2 Guarantee Application Form. 3. Credit Facility The Credit Facility extended by a financing institution to a Borrower and guaranteed by the Scheme must be represented by a Credit Facility Agreement. 4. Risk Sharing A minimum of twenty-five percent 25% for post shipment, 15% for preshipment and 20% for export production shall be assumed by the financing institution in the Guaranteed Credit Facility.
5. Duration of Guarantee Duration of the guarantee shall be as follows or as shall be otherwise determined by the scheme; (i) Pre-shipment Credit Guarantee. (ii) Export Production Credit Guarantee (iii) Post-shipment Credit Guarantee (iv) Export Performance Guarantee 270 days 270 days or * 60 days 270 days
* In the case of export production finance the duration of the guarantee will correspond to the duration of the guaranteed credit facility 6. Maximum Exposure The financing institution shall observe the requirements of the Concentration of Credit and Other Exposures Limits Regulations, 2001 and any other applicable regulations issued by the Bank of Tanzania from time to time. 7. Security A financing institution must be prepared to share the proceeds recovered from any security under a Credit Facility on pro rata basis with the Scheme. The financing institution shall also include an assignment clause in the Credit Facility Agreement with the Borrower for the possibility of assigning its securities to the Scheme in the event of default.
SCHEDULE II FORMULA Guarantee Cover (contingent liability to the Scheme) = (aa/cs x ad) x 85% or 80% or 75% Claim Payment Amount (actual liability) = (aa/cs x oa) x 85% or 80% or 75% Recoveries from the Borrower to cover claims paid by the Scheme will be shared on pro rata basis as follows: = (aa/cs x 85% or 80% or 75%) x Amount recovered Where: aa = approved amount cs = credit sanctioned ad = amount disbursed oa = outstanding amount