LPEI Targets Growth in Trade Credit Insurance through PKE Programme
Gresik, East Java - Indonesia’s Export Financing Agency (LPEI) is targeting growth in its trade credit insurance business alongside the shifting trend in international trade payment mechanisms, which is moving away from letters of credit (LC).
Business Implementation Director II of LPEI, Sulaeman, stated that the current global trend shows businesses increasingly using telegraphic transfer (T/T) or direct payment schemes, which are considered faster and more flexible than LC.
“Now, international transactions are increasingly reducing the use of letters of credit or LC. So now, most are using T/T, which is direct,” said Sulaeman during a media visit in Gresik on Friday.
This situation increases the need for risk protection, particularly against buyer default risks. For this reason, LPEI sees significant opportunities in developing trade credit insurance (TCI) products as a risk mitigation solution for exporters.
“T/T is different from LC. With LC, all risks are covered. With T/T, there is no institution providing protection, so one of them is through trade credit insurance. So, in my opinion, one of the insurance products we can develop going forward is trade credit insurance,” he explained.
He added that trade credit insurance will become one of the main products serving as the backbone of LPEI’s insurance business development in the future.
Additionally, Sulaeman said LPEI is also beginning to pioneer the development of marine cargo insurance, although its volume is currently still relatively small.
The development of this cargo insurance is carried out through cooperation with the Directorate General of Customs and Excise (DJBC), particularly in utilising data to support risk management.
From a performance perspective, LPEI targets its insurance business to grow above 8 percent this year.
In practice, trade credit insurance is used to protect exporters from the risk of non-payment by foreign buyers. With this scheme, businesses can still export to trading partners with higher risk profiles because potential losses can be claimed through insurance.
The development of this insurance and guarantee is also part of the Special Export Assignment (PKE) Guarantee and Insurance (PJA) programme run by LPEI.
Through PKE PJA, the government allocates Rp1.9 trillion from a total of Rp13.7 trillion in state capital participation (PMN) to support export financing.
This scheme not only provides financing but also protection through guarantees and insurance to mitigate commercial and political risks in international trade.
“Generally, the insurance used is trade credit insurance. For example, if we want to export to a certain country and are doubtful about the buyer, this is what entrepreneurs face. Well, we can cover it with insurance; if there’s a default or non-payment later, they can claim the insurance,” he clarified.