Untied export credit agency finance volumes have soared in recent years, doubling in size since before the pandemic and showing no signs of abating. What’s driving this rapid growth, which agencies are leading the charge, and are there potential downsides? Felix Thompson reports.
For well over a decade, Asian export credit agencies (ECAs) dominated the market for untied financing solutions – a form of support that is not linked to specific national exports but instead facilitates access to capital for strategic international projects. But following the Covid-19 pandemic and the Ukraine war, there has been a discernible shift in the market.
ECA support for foreign obligors has increasingly been extended on an untied basis, shows data from industry association the Berne Union. In 2023, such activity reached a multi-year high of US$42bn.
This was nearly double the US$22bn recorded just four years earlier, highlighting what the association describes as a “growing diversification of ECA products”.
Unlike standard ECA-backed financing, which is tied to exports from the supporting country, untied deals have no such requirements and typically align with broader economic, geopolitical or strategic objectives. It often takes the form of facilities that help companies secure imports of critical resources, such as metals or energy.
In the wake of the Ukraine crisis, European export credit providers worked to ensure energy security, facilitating a spate of deals for major commodity traders such as Trafigura, Vitol and Mercuria.
According to a Berne Union spokesperson, beyond resource security, “other cross-border” support also relates to untied loan guarantees for “push/pull programmes” – a financing mechanism that incentivises foreign buyers to source goods and services from a particular country without directly tying the funding to exports.
The untied financing trend is not only accelerating but also widening to encompass new sectors. In 2024, there was significant activity in Europe’s clean energy sector with big-ticket deals for developers of electric vehicle gigafactories, including ACC – Automotive Cells Company, Verkor and Northvolt.
Italy’s Sace is one of the most active providers of untied support and is broadening its Push strategy to include different types of borrowers, says Michal Ron, chief international business officer.
“We have guaranteed over €15bn under Push currently,” Ron tells GTR.
The Italian export credit agency is working to open up “new frontier markets” by providing untied financing, “not just to usual suspects and manufacturing companies, but also to sovereigns”, Ron says.
Sace has signed untied deals with the ministries of finance in several countries, including Mexico, Serbia, Côte d’Ivoire, Senegal and Benin.
As part of an MoU signed in March, the agency agreed to consider financing of up to US$3bn for projects led by the Saudi Public Investment Fund. This follows Sace’s backing of a US$3bn facility for Saudi Arabia’s futuristic Neom megacity development – the largest untied financing it has ever guaranteed.
“We would have expected these deals to peter out following Covid-19 and the Ukraine crisis,” says Ashley McDermott, a partner at law firm Mayer Brown.
Yet, activity remains strong as demonstrated by the “mega deals” signed in Saudi Arabia, he says.
Faster and easier
There is significant appetite for untied facilities in the bank market due to their simpler structures and fast turnaround times.
McDermott notes that banks initially faced an “adjustment period” as they determined which desk would book untied transactions and look after them, both in terms of deal execution and ongoing management.
“But it has all settled down now,” he says, adding that international banks “love these types of deals” due to their large size and faster execution compared to traditional export credits.
“It is good for lawyers as well; we can do more deals. It’s positive for the whole market,” he tells GTR.
A typical buyer credit transaction can take well over a year to be finalised, requiring various assessments, including for environmental, social and governance purposes, to be conducted. Altogether, such reviews can cost hundreds of thousands of dollars for any single project.
But untied deals bypass many of these checks, making them inherently much quicker and easier to execute.
“This is faster than tied financing, which we do in parallel. It is also priced-to-market which makes it very attractive to international banks – sometimes we also involve local banks that have a vested interest,” says Sace’s Ron.
She says the documentation is “very streamlined” and does not require “endless numbers of external consultants”.
“The quickest we have finalised an untied was last December, in India. It took three weeks door-to-door. On average it could be anytime between two and three months. The objective is to do these deals very fast.”
Sace has seen significant interest from banks that are attracted to its focus on “strong projects” and “creditworthy” borrowers, Ron says.
“We originally had about eight export credit banks, but this universe has now tripled, if not more. Now it is between 20 and 30 banks.”
Political tool
Notable providers of untied financing also include agencies from Japan, Korea, Canada, Germany, France and Australia.
When contacted by GTR for this feature, ECAs cited a range of reasons for developing untied programmes – often pointing to their role in supporting wider government initiatives.
The Japan Bank for International Cooperation (JBIC) first established an untied product in the early 1970s and has long been one of the more active providers, extending ¥91.1bn (US$0.6bn) in 2023.
In recent years, many of its untied loan projects have focused on tackling the climate crisis and ensuring global financial stability, the agency says. Since 2020, JBIC has also signed big-ticket deals aimed at securing LNG supplies from projects in Australia and Vietnam.
Germany’s untied guarantee programme has been in place for over 60 years, primarily geared towards securing raw materials for its industrial base. Since 2022, however, it has also covered foreign transformation projects that supply the German economy with climate-friendly intermediate products.
The government’s maximum liability from untied support reached €10.9bn at the end of 2024, up from €8.7bn in the previous two years and €4.7bn in 2021.
Export Finance Australia (EFA) received a mandate to support sustainable, quality infrastructure in the Pacific and Indo-Pacific in 2019, and as part of this, can help finance projects where there is “no Australian benefit” and no ties to an Australian export or business, an EFA spokesperson says.
The initiative was backed by the then-Liberal Prime Minister Scott Morrison, who had been seeking to challenge China’s growing dominance in the region.
“We can support a range of infrastructure, including [for] the region’s energy transition,” they tell GTR.
They point to two notable deals: a US$79mn loan for a renewable energy project in Thailand, and a US$32mn facility to enable the development, construction and operation of three wind farms in Quang Tri province in Vietnam.
Sace’s Ron tells GTR that a deal’s impact on Italian exports is a key consideration under the Push strategy. Borrowers are required to meet suppliers at match-making events on an annual basis, and the agency monitors the purchases of goods by foreign borrowers throughout the lifecycle of a deal.
The ECA also requires “sufficient and substantiated information” to assess whether a deal will create future commercial opportunities for Italian suppliers, she says, adding that Sace’s Push programme is not a “classic” untied product.
“It is a very flexible product that always has the singular scope of bringing our companies to the best buyers in the best export markets, some of which are new and others which are traditional but needed the extra push to reactivate them,” she says.
But there is also a political slant.
The Push scheme is “very adaptable” and well suited to quickly advancing state policy goals, Ron says. These include accelerating the energy transition, securing access to commodities, and even stemming the flow of inward migration.
“The Italian government has a political focus on African countries called the Mattei plan,” she says, referencing Prime Minister Giorgia Meloni’s initiative to spark economic development in Africa and to curb migration to Italy. The state launched the scheme in early 2024 with an initial funding pledge of €5.5bn.
“We are working to support this focus on the African continent both through tied and untied. In the wider panorama I have no doubt that in the coming 24 months, the velocity of the untied will be superior to tied instruments, as they can be very long in the making,” Ron adds.
Sapping resources?
Despite the booming activity, experts have warned of unintended consequences for the market.
Many of Sace’s untied facilities have involved borrowers in developing countries such as Senegal and Benin. Last year, the ECA agreed to cover a €100mn facility for the Trade and Development Bank, a trade and development financial institution operating in eastern and southern Africa.
“We are focusing very strongly on Africa,” Ron says, though also flags Sace’s activities in other regions. Since the start of 2024, the ECA has opened four offices in Colombia, Morocco, Singapore and Vietnam with its eye on greater untied business.
However, some industry figures caution that the rise of untied financing may hamper activity in developing markets.
“Untied is a global phenomenon and it’s growing,” says Gabriel Buck, managing director of advisory firm GKB Ventures.
“But it diverts the resources of a bank’s ECA team away from the buyer credits, away from having to fly personnel or establishing teams around the globe, because they can capture untied business domestically,” he says.
Buck argues that this could have lasting consequences, as “once a bank has lost its overseas knowledge, it’s never replaced”.
The impact, he warns, extends to exporters.
“Banks will start to lose knowledge and understanding of the overseas markets and their relationships with foreign buyers,” he says, which would impact their ability to conduct KYC and due diligence on both ends of the trade.
“If, as a bank, your business focus becomes reliant on short-term untied facilities, where the cost of capture, the agency functionality is a lot simpler, why would you spend time and energy chasing buyer credits?”
Untied financing may already be slowing deal-making activity in Africa, McDermott at Mayer Brown suggests: “Sub-Saharan Africa has a lot of issues and it’s not like there are loads of deals sitting there for ECAs and banks…. I don’t think the taps would be on for dozens of deals anyway.”
Several countries in Africa have experienced military coups in the past two years, while a strong US dollar, high interest rates and rising debt levels have added further economic strain to the continent.
Still, McDermott suggests there has “probably” been some impact from growing untied activity.
“ECAs invariably have limits on how many transactions they can do each year. They have borrower and country limits, but overall limits as well…. Untied is not the sole or the primary factor, but it is certainly part of the mix.”
OECD rules
Some fear that the growing use of untied financing may also undermine the sector’s longstanding commitment to OECD rules, which were introduced to prevent a subsidy war between export credit agencies.
Established in 1978, the OECD Arrangement on export credits has nearly a dozen members, including the US, UK, EU, Canada, Japan, Korea and Australia, which adhere to financing terms and conditions that encourage a level playing field for exporters.
The modernisation of the Arrangement two years ago was hailed as a landmark reformation, aimed at helping members remain competitive with agencies that operate outside of its purview – not least China.
But, according to Paul Mudde, a strategic business consultant who previously held roles at Atradius Dutch State Business and ABN Amro, the rapid expansion of untied financing could put the agreement at risk.
“In my view, the biggest challenge is the increased competition from non-OECD countries… and unregulated untied financing from both OECD and non-OECD states. As a consequence, the OECD Arrangement, despite the important modernisation in 2023, will likely become less relevant,” Mudde tells GTR.
There is a lack of transparency on the terms and conditions offered by untied providers, including ECAs and development finance institutions (DFIs) from countries such as Japan, Korea, Canada, Italy and the US, he argues.
This is driving a “subsidy race” between governments, Mudde says.
“These developments are undermining the international level playing field. The whole multilateral system that was developed during the past 60 years, including the WTO, the Paris Club, the OECD export credit and aid regulations, may fall apart, which would be very unfortunate.”
He suggests “other countries are likely to follow”, adding: “You will likely see a lot of goods and services being procured from the countries providing these untied facilities, even if they are de jure untied.”
Industry figures also warn that untied deals could ultimately draw greater – and unwanted – scrutiny from regulators.
In the wake of the global financial crisis, the export finance industry gathered sufficient data to secure favourable regulatory treatment – thereby helping to reduce the regulatory capital burden on banks.
However, given the nascency of untied products in Europe, their default risk is currently unclear.
“We don’t have any substantive claims or trade register data yet for this massive surge of domestic or untied ECA support,” said Chris Mitman, a managing partner at Acre Impact Capital during a GTR roundtable held in late 2024. “We mustn’t forget the importance of what the register did for us all in terms of regulatory treatment of ECA cover and what this could mean for the industry as a whole if that starts to get diluted.”
McDermott says the industry is yet to go through a “big cycle” of untied deals and banks “do not have the data on defaults yet”.
“Could there be an impact on how banks allocate regulatory capital towards export finance? This would be a blow to the industry.”
Existing in tandem
Analysts suggest that despite its upward trajectory, untied financing is unlikely to overtake more traditional forms of export credit support.
The Berne Union says it is an expanding product area and business levels will likely “grow further as more ECAs develop untied products”.
But it downplays the idea that untied could become the dominant form of ECA financing. “We don’t see it as replacing traditional buyer credit structures…. Flexibility is increasingly important for the industry and the additional tools simply allow ECAs to support exporters more efficiently.”
Still, providers of untied financing are optimistic about its role in the future and see it as a valuable complement to tied financing.
“We do see a significant role in our untied programme going forward adding to the more traditional forms of ECA support,” says a spokesperson for Germany’s Federal Ministry for Economic Affairs and Climate Action.
They note “numerous enquiries” were made in 2024 for untied support related to securing commodities for new technologies, as well as projects involving green hydrogen, ammonia and battery cell projects.
For Sace, traditional ECA support will remain particularly relevant in sectors such as large-scale infrastructure and defence.
Tied and untied facilities can be signed “hand in hand”, Ron says.
“We closed the €3bn deal in Neom… there are likely to be tied facilities from Neom in the future; this transaction acts as a door opener, letting our companies in, allowing access to the procurement [teams]. Once you’re in, it is much easier to bid on additional projects,” she says.
More broadly, she expects untied financing to continue expanding. “In terms of volumes, I have no doubt that the big increase will take place in the untied space.”
“I do not know if it will overtake, match or near the tied volumes,” she tells GTR. “But what we have predicted and evaluated very carefully is that this will increase in terms of volumes. We don’t see any reason why it should stop, because so far, it’s a win-win situation for our Italian exporters and is very adaptable.”
