UKEF, the British ECA, has agreed to lend US$50mn to Alfa Bank of Russia.

The agreement marks the first time UKEF has utilised its direct lending scheme (DLS) – a facility which has been eagerly awaited by those in the marketplace.

Alfa Bank will on-lend the finance to Russian companies looking to import UK goods and services, but no single industry sector has been earmarked to benefit.

As part of the agreement, Alfa Bank will assume all of the transactional risk, meaning UKEF doesn’t stand to lose out if borrowers fail to repay the funds. Specific terms have yet to be decided upon, but a UKEF spokesperson tells GTR that the pair are about to enter into detailed negotiations.

Given that UKEF expects the finance to be disbursed in the form of export credits worth anywhere between £1mn and £25mn, SMEs are likely to reap the biggest dividend.

The UK’s trade minister Lord Green hailed the deal, saying: “Our exports to Russia have nearly tripled since 2002 and it is set to be the largest market for UK goods exports outside of the US, the EU and China. Today’s trade delegation aims to identify and secure further opportunities for UK exporters.”

The DLS was announced by chancellor George Osborne in his Autumn Statement in 2012. That it has taken more than a year to see the light of day has been the source of much consternation among the export community.

Even before its launch, there was a feeling among certain parts of the finance sector that the £1.5bn set aside for the DLS would be no more than a drop in the ocean of financing required to support UK exports.

Earlier this year, Barclays’ global head of capex financing solutions Gabby Buck told GTR that the deals the DLS is expected to support could be “quite easily accommodated in the banking market”.

He continued: “If you do the maths that [the £1.5bn DLS] could equate to supporting just 30 transactions, while there’s a lot of effort being put in this scheme it’s not a scheme the banks feel is required. It’s the big ticket transactions for major infrastructure projects were you may have a build period of up to five years; repayment periods of 10, 12, 15 years, where it’s large and it’s long-term: that is the area where there’s a requirement for support.”

The feeling is that UKEF’s £5bn export refinancing (ERF) scheme, announced in July 2012, has the potential to be a greater game-changer than the DLS. But while it was hoped that ERF would be open for business at the end of 2012, it has yet to see its first transactions.