How has your service portfolio expanded in Ecuador?
We have been operating in Ecuador for the past 10 years. Currently, we offer two services: credit insurance and credit information services. We primarily tend to large manufacturing companies, both multinational and local. In Ecuador, our product is progressively gaining awareness, as the credit insurance policy is a relatively new product here. Big companies are more exposed to this type of product, and at the top of the market pyramid we are reaching a maturity level with industrial clients. Moving forward, we aim to target SMEs, which have to be linked with the right promotion campaign. In Ecuador, there are just three players, and we are the market leader with 52% market share. Regulations for insurance companies are strict and overseen by the Superintendencia de Companias Valores y Seguros.
How well do people understand credit insurance?
We are intensively working on raising the awareness of credit insurance and its benefits compared to other financial instruments. There are many opportunities there, and financial managers that have tried our product know about its credit insurance benefits. However, in some cases they work with other types of financial instruments, principally from the banking system. For example, letters of credit for exporters are a common instrument to guarantee against defaults on payments for export activity. However, a credit insurance policy is cheaper, and it covers all export transactions for a one-year period, as compared to letters of credit, which are issued on a case-by-case basis. Coface is present in 100 countries around the world, and if companies have a problem exporting with the risk of a default in payment, then Coface is the best market alternative, as it has a physical office there to support and recover the amount.
What is your approach to digitalization for internal processes and client interactions?
Technology is in every single aspect of our lives, not merely the financial industry. Coface has done a great job understanding this dynamic global opportunity, and one of our strengths is Cofanet. This is a cloud-based platform where we provide risk information, and companies can navigate through our big data with input from 30 million companies worldwide. This is one of our most important competitive advantages over other firms; we are the only credit insurance company offering this service in all of Ecuador. In 2018, we committed another USD10 million to develop and upgrade this platform, and the next step is to develop it for brokers.
What is your growth strategy to target the SME segment?
First, we strive to grow organically following the growth of exports. International investment is another important pillar, though it takes more time to develop and see results. Therefore, it is better to focus on exports. Historically, we have been an exporting country of agricultural goods and limited value-added products such as bananas, cocoa, petroleum, flowers, and shrimp. We thus need to develop that not just because it is a source of income but also because it is a way of guaranteeing a hard cash flow in the economy. The government is moving in the right direction and developing the export industry apparatus, and Coface has to be a key stakeholder there. We are currently discussing with the private sector and its chambers to propose the creation of an incentive tax structure for those companies that count on credit insurance, the idea of which is to encourage the private sector to boost exports while minimizing the risk of default. We are the best option for exporters. Second, we are targeting the SME segment. At the top of the pyramid, there are 113 companies with an annual turnover of USD18 billion. We have 62% penetration in the segment, well above our 52% general market share, but we still seek to grow here.