International Business Talks: Expanding into new markets

Trade finance vs. export finance: Trade finance provides short-term financing and liquidity support (e.g., guarantees, letters of credit), while export finance focuses on long-term financing of capital goods and uses export credit agency (ECA) coverage to mitigate risk.  

Global network: RBI has 11 network banks and more than 2,000 banking partnerships and can offer its solutions almost worldwide.  

Market knowledge: Entering new markets requires not only market research, but also an awareness of local laws and regulations, as well as employees who know the target market and can work across cultures.  

Risk mitigation: Key risks include counterparty, performance, and political risks. Letters of credit and ECA-covered financing are key instruments.  

Trends: Green financing is becoming increasingly popular, as is untied or semi-tied financing from ECAs such as the OeKB Shopping Line. 

Digitalization: Companies use bank platforms or multi-banking platforms for larger portfolios to handle trade finance instruments. 

Evgeniya Sharkova begins by noting that both trade finance and export finance facilitate trade and complement each other, before going on to explain their details and differences. “With trade finance our prime goal is to mitigate the risk as well as to support the working capital of the companies by providing short term financing solutions,” she explains. She also emphasizes that 80% of trade finance instruments that RBI issues, like guarantees or Letters of Credit, are accepted by beneficiaries directly because of RBI’s excellent credit ratings. Thus, clients benefit from faster transactions and also save costs.

While trade finance typically involves short-term transactions, Sanin Merdžan explains that export finance refers to long-term financing provided by banks to buyers of capital goods.  He also emphasizes the importance of risk mitigation: “We are collaborating a lot with export credit agencies (“ECAs”) that provide insurance against political and commercial risks.”  

Sanin Merdžan also mentions international connections and expertise. RBI offers export finance solutions worldwide from its headquarters in Vienna, leveraging on the extensive knowledge of all major Western European ECAs while also collaborating within the whole RBI Group, spreading across 11 network banks in CEE and SEE and the global network of branches and representative offices across Europe, Asia and Northern Africa. Evgeniya Sharkova also mentions RBI’s global reach in trade finance: “We are truly international. We have over 2.000 banking partners all across the world. So, we are capable to issue our guarantees into almost any country.” 

Both trade finance and export finance solutions are available to corporate as well as institutional clients like banks and non-bank FIs. Export finance also supports sovereign borrowers such as the ministries of finance targeting financing of public infrastructure projects backed by ECAs. 

In order to tap into new markets, whether through foreign investment or export activities, expertise and market knowledge are essential. So, besides market research and knowing your competition and your USP, cultural differences play a huge role. Sanin Merdžan: “We are talking about challenging international markets. Companies entering new markets need employees who understand the markets and can adapt to the culture of the target market.” RBI is a trusted banking partner to facilitate the company's international expansion, he says. 

When it comes to local laws and regulations, Evgeniya Sharkova emphasizes that the first step is awareness. Plus: The right partner not only brings the expertise but is also able to find an appropriate solution to address the challenge. The expert recounts a scenario where the trade finance team could save a client from incurring losses in a tricky situation involving currency control in Egypt. 

When expanding abroad, risk mitigation is a main issue. There are different types of risk in the market: counterparty risk, performance risk, or political risk. “A Letter of Credit ensures that the payment is made only when all conditions of the agreement between an exporter and importer are fulfilled, and that's a perfect tool to mitigate payment risk and performance risk,” Evgeniya Sharkova notes. 

Regarding political risk, which is particularly relevant when talking about emerging markets, export finance solutions support transactions with the coverage of an ECA that mitigates up to 100% of political risk. “This is where export finance can be a game changer,” Sanin Merdžan says. 

Evgeniya Sharkova also talks about multiple trends that are emerging. Due to geopolitical changes and turbulence, supply chains and trade flows are changing. “We see that there's an increasing trade between Asia and Europe, we see that Northern Africa is starting to play a more important role, also the Middle East. We as RBI try to accompany our customers worldwide and anticipate where they need us to set up all necessary infrastructure in advance,” she emphasizes. These trends in emerging and changing markets are true for both trade and export finance, Sanin Merdžan confirms. 

“We also want to support green industries,” Sanin Merdžan adds. “Due to the huge project amounts needed, there are a lot of opportunities for ECAs to support their exporters and their buyers with green financings and for us as banks to help them to get there.” Evgeniya Sharkova takes the same line: “We do offer our solutions also in a sustainable way. And not only to our corporate clients, but also to our institutional clients.” RBI offers a so-called greenium, which is a premium or a discount, that a customer gets for using the funds and the solutions in a sustainable way.  

Another trend with export finance are so-called untied and semi-tied financing solutions that export credit agencies are bringing to the market. “An example is the OeKB Shopping Line”, Sanin Merdžan states. With this solution clients can bundle different purchases from Austrian manufacturers into one ECA covered credit line.  

“I think digitalization is the name of the game,” Evgeniya Sharkova points out. The trade finance industry has existed for ages and while it is still very paper-based, digitalization is playing a more and more important role. “On the corporate side, what is absolutely trending over the last years is platforms,” she says. Companies with a smaller portfolio of trade finance instruments use proprietary platforms of banks. “We at RBI offer a user-friendly solution called eTradeOn, which allows customers to instruct us digitally to issue guarantees and view their guarantee portfolio.” 

Companies with large portfolios of trade finance instruments give preference to multi-banking platforms. “We at RBI are proud that we can support all major multi-banking platforms,” Evgeniya Sharkova says. “So, we consider ourselves as pioneers in this field.”