Export financing (Finexpo)

Finexpo is an inter-ministerial advisory committee managed by the Directorate financial support to exports (B2) within the Federal Public Service Foreign Affairs, Foreign Trade and Development Cooperation and by the Administration for International and European Financial Affairs of the Federal Public Service Finance.

Description of the instruments

Below is a description of the instruments, specifically mixed credit, or State-to-State loan combined with a commercial loan, an untied State-to-State loan, a gift, a renewable energy instrument for SMEs, an innovation instrument for SMEs, interest subsidy with or without a gift, interest stabilisation, and technical assistance.
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Mixed credit, State to State loan combined with a commercial loan

Tied State to State loans (SSL) are granted by Belgium to developing countries to finance development projects carried out by Belgian companies. These mainly concern Belgian infrastructure projects or Belgian projects for the export of infrastructure products and associated services, such as water facilities, sanitation works, the health sector, and so on.

The state loans serve a dual purpose. On the one hand, they contribute towards development in the recipient counties, while on the other hand, they support the Belgian economy by promoting long-distance export from Belgium.

In order to offer as many companies as possible the opportunity to submit an application, the amounts for State to State loans cannot exceed EUR 10 million per project.

State to State loans are granted under very favourable conditions. The interest rate is 0% and the grant element is 35%.

The loan period for a pure tied State to State loan is 37 years, including a grace period of 17 years.

State to State loans are usually combined with a commercial loan in order to maximise the contract amount. The division between State to State loan and commercial loan is currently 87.5% and 12.5% respectively.

The loan period for the State to State loan is 42 years, including a grace period of 22 years, in order to achieve a minimum grant element of 35%.

After payment of the advance with the SSL, the other invoices are paid pro rata based on the rate paid on the State to State loan and that of the commercial loan.

As the recipient country will ultimately have to repay the State to State loan, Finexpo must also receive a priority letter from the country in question. This letter is required to confirm that the project is regarded as a priority by the country in question and it must sent by the government levels of the developing country, such as the president, prime minister, or the minister for finance.

Awarding criteria for a tied State to State loan

In order for a tied State to State loan to be awarded:

  • the project must be a priority for the recipient country;
  • the project must have no commercial viability;
  • the project must be relevant to development;
  • there must be competition;
  • the project must sufficiently fulfil Belgium's interests. 

The maximum amount of the project varies around the 10 million euro mark.

Untied State to State loan

Finexpo also has an untied aid programme. Untied aid is aid given to a developing country without the obligation to procure infrastructure products and services from companies from the country granting that aid. In the case of untied aid, an international tender is issued, in which case any company or organisation from any country may carry out the project.

Eligible countries are among the least developed countries (LDCs) as determined by the UN, or the eight heavily indebted poor countries (HIPCs) as determined by the International Monetary Fund and the World Bank, for which Belgium has the experience and capacity to guarantee controls and monitoring.

Untied State to State loan

Untied aid is granted exclusively through State to State Loans (SSL) and has:

  • 0% interest rate;
  • a repayment term of 34 years in total, of which 14 years is a grace period during which the beneficiary country does not have to make any repayments, followed by a 20-year repayment period.

According to the rules of the Organization for Economic Co-operation and Development (OECD), untied aid must include a grant element of at least 35%. Some countries that are eligible for untied aid must receive at least a 50% grant element. To find out the exact grant element for a particular country, you can contact the Finexpo Secretariat.

Given the fact that the approval of untied aid is not linked to a predetermined exporter, this support can only be given in the form of a SSL. In order to give a sufficient number of developing countries, namely the Least Developed Countries and Highly Indebted Poor Countries) the opportunity to apply, amounts of SSL are limited to 8 million euros.

If a country wishes to finance a project costing more than 8 million euros, it is possible to combine the untied loan with a commercial loan.

This "untied" mixed loan is handled in the same way as a tied mixed loan, and the SSL has the same features as the tied SSL, a repayment term of 42 years, and a 22-year grace period).

Documents for an untied State to State loan

Grant

The grant is an aid instrument for which the OECD rules specifying a 35% minimum grant element must be observed. The 35% grant element of the contract amount is paid during the execution period of the project in the form of a grant. The balance of 65% has to be provided in the form of commercial financing or be paid in cash.

Why opt for a grant?

Grants are chosen because:

  • enterprises want to reduce their administrative burdens as much as possible;
  • one of Finexpo's goals is to support SMEs that are interested in selling to the export market

Criteria for making a grant

In order to make a grant: 

  • the project must not be commercially viable. This means there must be no positive investment cashflow during the first ten years;
  • the project must be relevant to development;
  • the project must be a priority for the recipient country;
  • there must be competition;
  • the project must sufficiently fulfil Belgium's interests.

While for the other aid instruments, Finexpo's contribution is spread over a large number of budget years, the grant is paid in the very short term, and this immediately affects the budget of the year in which the grant is paid. This is why the use of grants is limited to small projects for which long repayment periods are not justified. The grant is not exclusive to SMEs, but is intended for small contracts up to 8,571,529 euros, meaning that a grant can be no more than 3 million euros (8,571,529 euros x 0.35).

Renewable energy instrument for SMEs

Finexpo can support your SME if it fulfils all of the conditions below:

  • You are a Belgian SME.
  • This SME has a renewable energy project.
  • The project involves infrastructure or investment products and a related service.
  • You would like to export this service to a particular developing country.
  • The project offers sufficient added value for Belgium.
  • The contract amount does not exceed 876,000 euros.
  • The product or service will be exported to a public-sector client.

Finexpo can support you by making a grant of between 80.01% and 100% of the contract value up to a maximum of 700,000 euros, and 500,000 euros depending on the level of Belgian interests.

Belgian SMEs

In order to determine whether or not a company is a small or medium-sized enterprise, the European definition is used. This depends on:

  • staff headcount;
  • turnover or balance sheet total;
  • autonomy. This means not more than 25% of an enterprise may be owned by an enterprise that does not meet the SME definition.

In order to fall into a certain size category, each of the three elements must be fulfilled.

Renewable energy project

This concerns projects that promote the use of renewable, ecological energy and are in line with renewable energy projects, such as, but not limited to, those in the list below:

  • renewable electricity generated by wind energy, solar energy, hydropower, marine renewable energy, geothermal energy
  • renewable heating and cooling by means of solar energy, thermal energy or heat pump
  • sustainable transport;
  • horizontal topics such as grid integration and storage facilities;
  • technologies that fit into this framework within the Federal Recovery Plan.

Projects that offer an alternative to fossil fuels and contribute towards a reduction in greenhouse gas emissions are also eligible. The projects must result in diversification of the energy supply and help to reduce dependence on oil and gas. 

Infrastructure or investment products and related service

Finexpo's aim is to support the export of Belgian capital goods and related services. This means that other products and services fall outside the scope.

The products and related services that are developed must be fully functional. They therefore need to be finished products or services and not products that are in a testing phase. Despite this, developments intended for adaptation to the local context may also be financed.

The products and related services may also be commercially viable.

The training of the client's personnel to enable them to start using this product after delivery may be invoiced for.

Initial export of the product

The export project for which a contribution is being requested from Finexpo must relate to a Development Assistance Committee (DAC) country to which the product has not previously been exported. However, the enterprise is permitted to have already exported that product to another DAC country. A business may receive support twice through this instrument. However, the second round of support cannot be provided for the same export country as for the first round. The second support application cannot be submitted until completion of the first project, therefore after the last invoice has been paid.

To a particular developing country

The regulatory framework of Finexpo only allows the World Trade Organization (WTO), the World Bank, and the OECD to provide support in the form of tied and untied aid to developing countries. This support must be relevant for the development of those countries.

Sufficient added value for Belgium

This instrument may only be used by projects of Belgian SMEs that offer a sufficient level of interest for Belgium (at least 30%). The percentage of Belgium's interest determines the amount of support.

The method of calculating the interest can be found in the Finexpo vademecum. This also specifies that the project must be in keeping with the enterprise's long-term strategic export vision.

Maximum contract amount

For projects where the Belgian interest is at least 50%contracts worth up to 700,000 euros are financed in full. This contract value could possibly be increased to 874,000 euros, but the amount in excess of 700,000 euros must then be financed by the client, except for LDCs where the maximum contract amount is 700,000 euros.

For projects where the Belgian interest is at least 30%contracts worth up to 500,000 euros are financed in full. This contract value may possibly be increased to 624,000 euros, but the amount in excess of 500,000 euros must then be financed by the client, except for LDCs where the maximum contract amount is 500,000 euros.

The maximum contract amounts must be respected, given that the OECD arrangement requires the SME instrument to contain a grant element of at least 80%, and even 100% for LDCs.

To a public-sector client

The client must be a public entity 

Innovation instrument for SMEs

Finexpo can provide support to your SME if it fulfils all of the conditions below: 

  • You are a Belgian SME.
  • You offer an infrastructure or investment product and related service.
  • You would like to export this product or service to a developing country for the first time.
  • The product or service offers sufficient added value for Belgium.
  • The contract amount does not exceed 876,000 euros.
  • You have a public-sector client.

Finexpo can support you by making a grant of between 80.01% and 100% of the contract value up to a maximum of 700,000 euros, and 500,000 euros depending on the level of Belgian interests.

Belgian SMEs

In order to determine whether or not a company is a small or medium-sized enterprise, the European definition is used. This depends on:

  • staff headcount;
  • turnover or balance sheet total;
  • autonomy. This means that not more than 25% of an enterprise may be owned by an enterprise that does not fulfil the SME definition.

In order to fall into a certain size category, each of the three elements must be fulfilled.

Innovative product

Finexpo's aim is to support the export of Belgian capital goods and related services. This means that other products and services fall outside the scope.

The products and related services that are developed must be fully functional. These need to be the first versions of finished products or services and therefore not products that are in a testing phase. Despite this, developments intended for adaptation to the local context may also be financed.

These products must also be innovative. In order to determine whether or not a product is innovative, the definitions used by regions, and federal and European institutions/agencies working in the area of innovation will be used. Products developed with public-sector support for innovation are recognised as such. This support may have been provided during the R&D process and/or product or process development. If a product has not been developed with public-sector support, it may still be eligible. In this case, the application form must include detailed reasons for the application and this will be assessed by the Belgian Science Policy Office (Belspo).

The products and related services may be commercially viable.

The training of the client's personnel to enable them to start using this product after delivery may be invoiced for.

The innovation cost must account for at least 40% of the total project cost. The following elements may be included in the calculation to determine this:

  • the cost of all productive factors, such as capital, employment, and raw materials that form part of this improved product
  • if the new product consists of a combination of products (whether or not new), the cost of (all individual productive factors of) the various products;
  • costs involved in adapting the innovative product to the context;
  • spare parts.

The following cost items are not included in this calculation:

  • transport and other logistical costs;
  • financial costs;
  • management costs;
  • training costs;
  • maintenance costs; 
  • installation costs;
  • margin and overhead

Initial export of the product

The support may only be applied for once for the same product and must relate to the first-time export of a product to a country on the DAC list.

Developing country

The regulatory framework of Finexpo only allows the World Trade Organization (WTO), the World Bank, and the OECD to provide support in the form of tied and untied aid to developing countries. This support must be relevant for the development of those countries.

Sufficient added value for Belgium

This instrument may only be used by projects of Belgian SMEs that offer a sufficient level of interest for Belgium (30% or 50%). The percentage of Belgium's interest determines the amount of support.

The method of calculating the interest can be found in the Finexpo vademecum. This also specifies that the project must be in keeping with the enterprise's long-term strategic export vision.

Maximum contract amount

For projects where the Belgian interest is at least 50%contracts worth up to 700,000 euros are financed in full. The contract value may possibly be increased to 874,000 euros, but the amount in excess of 700,000 euros must then be financed by the client, except for LDCs where the maximum contract amount is 700,000 euros.

For projects where the Belgian interest is at least 30%contracts worth up to 500,000 euros are financed in full. The contract value may possibly be increased to 624,000 euros, but the amount in excess of 500,000 euros must then be financed by the client, except for LDCs where the maximum contract amount is 500,000 euros.

The maximum contract amounts must be respected, given that the OECD arrangement requires the SME instrument to contain a grant element of at least 80%, and even 100% for LDCs.

To a public-sector client

The client must be a public entity

Interest rate bonification with or without a grant

grant element of 38% is provided for this instrument. This grant element is calculated by combining an interest rate of 0% with a long repayment period of between 10 and 15 years. The length of the loan repayment period depends, among other things, on the differentiated discount rate (DDR) set by the OECD, which varies from year to year.

With the interest rate bonification, Finexpo pays all of the interest costs linked to the loan, which is the contractual amount plus the Credendo premium that was applied to the client. The latter simply repays the capital.

Specifically, Finexpo pays the difference between the reference rate used by the bank in question and the 0% rate that is applied to the client's loan. Finexpo pays these interest costs during the implementation and repayment period, based on the documents provided to it by the bank every six months.

An additional grant may be added in order to reduce the repayment term. If, for example, the grant element of the conventional interest rate bonification is reduced from 38% to 20% and the difference of 18% is paid in the form of a grant, this significantly reduces the repayment term. As a consequence, the Credendo premium will also be lower.

Depending on the amount, the payment of the grant may be extended over several budgetary years without exceeding the lending period. The interest rate bonification and the grant together account for a 38% grant component. Finexpo calculates the length of the repayment period for each individual dossier.

Finexpo's support can only be given for projects with a loan issued in euros. The contract amount of the interest rate bonification with or without grant must not exceed 10 million euros.

Awarding criteria for an interest rate bonification

In order to award an interest rate bonification:

  • the project must not be commercially viable. There must therefore be no positive investment cashflow during the first ten years;
  • the project must be relevant to development;
  • the project must be a priority for the recipient country;
  • there must be competition that also receives support;
  • the project must sufficiently fulfil Belgium's interests;
  • the project must be covered by Credendo.

The loan must be issued in euros. In view of the limited budgetary means, the contract amount of the interest rate bonification must not exceed 10 million euros.

Interest rate stabilisation

Your client may be granted a fixed interest rate if it fulfils all of the conditions below:

  • You are an SME or a large business.
  • You export infrastructure or investment products and related services to any country.
  • Your client does not wish to pay cash, but wishes to have a deferment of payment in the form of a loan, and if the deferment is at least two years.
  • This loan is issued in euros, USD or Yen.
  • The loan does not exceed 100 million euros.
  • The project is covered by Credendo.

Your client may then be granted a fixed interest rate for the entire loan period by availing itself of interest rate stabilisation. It will then have the assurance of being able to repay the loan amount at the same interest rate throughout the entire loan period. This may provide an advantage over competitors who are not able to offer these payment terms.

Commercial Interest Reference Rate 

The fixed interest rate guaranteed to the buyer under interest rate stabilisation is the Commercial Interest Reference Rate (CIRR) (CIRR). The CIRRs for the different currencies are determined each month by the OECD on the basis of specific economic parameters and are notified to the Member States.

In the case of stabilisation, Finexpo intervenes based on the difference between the guaranteed stabilised rate (CIRR) and the interest rate at which banks obtain refinancing on the short-term market (Euribor or Libor), increased by a bank commission. Currently, this margin is 0.75%.

Technical Assistance

On 15 January 2016, the Belgian Council of Ministers gave its approval for the creation of a new Finexpo instrument: the grant for technical assistance. Technical assistance is an instrument whereby tied aid is allowed, even in countries where aid is generally untied.

Technical assistance related to an investment project in a developing country consists of services that: 

  •  enable civil servants, labourers and clerical workers from the recipient country to build expertise related to an investment project
  • take the form of technical training, advice and support by personnel from the donor country.

Criteria for assessing applications for a grant for technical assistance

The reasoned and well-documented application for a grant for technical assistance must be made on a specific application form.

The criteria for making an application for a grant for technical assistance are given below:

  • The grant can only be obtained by a Belgian firm;
  • The client must be a public institution;
  • The maximum amount of funding is 1 million Special Drawing Rights (SDR) or 3% of the contract amount. The lower of these amounts is used as the maximum threshold.

Belgian companies may only apply for the grant for technical assistance for services:

  • related to investment projects performed by the same Belgian company that are financed by untied aid;
  • related to investment projects performed by the same Belgian company that are financed under commercial conditions.

Therefore the grant for technical assistance cannot be combined with an interest rate rate bonification or a tied State to State loan. However, it can be combined with an untied State to State loan or interest stabilisation.

Example of technical assistance

A Belgian company that wishes to export buses on a commercial basis to a developing country can apply for a grant for technical assistance. With this grant, the Belgian company can train local bus drivers, without having to put the cost of training in the contract. The company can therefore lower its prices which gives a competitive advantage compared to other foreign competitors. The same applies if the company participates in an international tender in the context of untied aid. The company can take the training out of their tender, reduce their prices, thereby achieving a competitive advantage.