Driving growth in emerging economies: The role of ECAs in development projects
Can export finance unlock sustainable development in higher-risk markets? ECAs have an opportunity to broaden their role while remaining true to their export promotion mandate.
After a decade of abundant global liquidity, expanding private capital flows, and the rise of new bilateral and commercial lenders, sovereign financing landscapes have become increasingly fragmented and complex. As capital is repriced against heightened geopolitical, climate, and refinancing risks, debt distress across many low-income economies is deepening, exposing widening gaps between development needs and access to long-term sustainable finance. Against this backdrop, a more fundamental question has emerged: can Export Credit Agencies (ECAs), whose role has long been to facilitate cross-border trade, insure commercial and political risks, and support national export promotion, also become agents of development-driven economic growth?
This question goes to the heart of how ECAs define risk, purpose, and partnership in a changing world economy. The answer does not lie in abandoning commercial discipline or transforming ECAs into aid institutions. Rather, it lies in recognising that developmental impact can strengthen long-term sovereign resilience and repayment capacity when supported by disciplined project structuring, sustainable lending assessments, and credible analysis of economic returns. Projects that strengthen food security, energy access, and productive capacity could make economies more resilient and, over time, safer places to trade and invest.
This does not imply that ECAs should replace equity investors, development institutions, or macroeconomic reform programmes. Nor does it suggest that developmental impact automatically translates into improved credit quality. Rather, the argument is that development-aligned infrastructure, when supported by robust sustainable lending frameworks, sound governance, and appropriate risk-sharing structures, can help bridge the bankability gap in markets where long-term commercial capital remains scarce.
Why Category 6 and 7 markets matter
The countries classified by the OECD as Category 6 or 7 represent the highest levels of actual or perceived sovereign risk. Many are low-income or fragile states, where credit ratings are constrained by limited fiscal space and vulnerability to shocks. Yet they are also among the markets with the greatest developmental and demographic potential. Their demand for infrastructure, education, renewable energy, and logistics will define the next generation of global growth.
Paradoxically, ECAs, created to operate countercyclically and fill market gaps, often find themselves least active in the very economies that most need long-term, patient capital. Pricing calibrated to actual or perceived risks, combined with restrictive tenors and conservative capital treatment, can render projects unbankable even when their developmental impact is clear.
If ECAs are to remain relevant in these frontier markets, they must move beyond a narrow interpretation of credit risk and recognise the wider economic value of projects that lay the foundations for long-term stability and growth. This echoes calls from several African ministers for more patient, partnership-based financing.
Development as a risk mitigant
Treating developmental outcomes as part of the risk calculus is not as radical as it might seem. Infrastructure that improves energy access reduces the fiscal burden of subsidies. Education and skills development expand tax bases and formal employment. Regional transport corridors and power interconnectors foster trade integration and resilience to external shocks.
Financially, such investments can enhance long-term repayment capacity and sovereign resilience when grounded in rigorous sustainable lending assessments, robust economic-return analysis, and fiscally sustainable structures. From a policy standpoint, they align export finance with the Sustainable Development Goals, the Paris climate commitments, and the Sevilla Commitments, which call for integrating sustainability, resilience, and shared prosperity into the core mandate of international finance and trade.
Crucially, this argument is contingent on a robust sustainable lending assessment, ensuring that projects are economically viable, fiscally responsible, and aligned with debt sustainability frameworks. In short, development and creditworthiness are not competing objectives; they can be mutually reinforcing. Importantly, the aim is not for ECAs to absorb greater risks in isolation, but to use their balance sheets strategically to mobilise broader pools of private and institutional capital into markets where transformative infrastructure remains underfinanced.
Signs of convergence: ECAs moving closer to DFIs
Some ECAs are already demonstrating what this convergence looks like in practice. Denmark’s EIFO and Sweden’s SEK offer sustainability-linked and green financing (including export credits in SEK’s framework) and integrate environmental and social due diligence into their risk assessments. Bpifrance AE and Euler Hermes in France and Germany have begun to integrate climate and transition criteria into their product portfolios.
These examples mark early but important steps toward a model where ECAs operate alongside Development Finance Institutions (DFIs) and Multilateral Development Banks (MDBs), sharing risks and leveraging different sources of capital. The next logical evolution is to move from ad-hoc cooperation to structured co-guarantee and risk-sharing ecosystems, for instance where donor-funded first-loss tranches or trust-fund guarantees enable ECAs to extend tenors, increase cover, and support higher-risk borrowers sustainably.
This also requires alignment that recognises the procurement and content ties inherent to ECA financing, ensuring that partnership models and blended structures can operate transparently while still fulfilling national export and supply-chain objectives. The United Kingdom’s introduction of the UKEF Climate Resilient Debt Clause (CRDC) further reinforces this direction, embedding climate adaptation and resilience into export finance by providing temporary fiscal space for vulnerable nations following climate-related disasters. More broadly, mechanisms such as CRDCs demonstrate how ECAs are beginning to evolve beyond traditional export-credit structures toward financing architectures that explicitly recognise sovereign resilience as part of long-term credit sustainability.
The geopolitical imperative
There is also a strategic case for this shift. In many emerging markets, especially across Africa, Asia, and Latin America, the competition for influence is increasingly being expressed through infrastructure finance, strategic supply chains, energy-transition investment, logistics corridors, and long-term access to critical resources. Non-OECD creditors have filled much of the space left by Western lenders, often by offering longer tenors and lower upfront costs.
For OECD members, maintaining credibility and partnership relevance in these markets requires rethinking how export finance can advance both economic and diplomatic objectives. Development-aligned ECAs could help build a distinct model, one grounded in transparency, sustainability, values, standards, and shared growth, while providing an attractive alternative to borrowers seeking diversified financing options. In this context, development-aligned export finance also becomes a tool of economic diplomacy. OECD members increasingly recognise that sustained engagement in frontier markets is not solely a question of trade promotion, but one of strategic relevance, supply-chain resilience, and long-term partnership credibility.
Revisiting the OECD Arrangement
The ongoing debate around reforming the OECD Arrangement on Officially Supported Export Credits offers a timely opportunity to operationalise these ideas. Proposals under discussion could have important implications for higher-risk markets, supporting greater scope for engagement while maintaining appropriate discipline.
These changes would not diminish risk management; rather, they reflect an evolving approach that recognises the role of broader economic and structural factors in shaping long-term sustainability.
Allowing ECAs greater flexibility to differentiate between speculative commercial exposure and development-aligned infrastructure could unlock a new class of bankable projects. Combined with blended-finance structures and multilateral partnerships, this would enable ECAs to finance not just exports, but the enabling systems that make trade viable in the first place.
Rethinking risk and partnership
Extending into higher-risk markets will require new instruments, frameworks, and disciplines. The future role of ECAs in frontier markets may therefore be less about taking higher standalone risks than becoming sophisticated orchestrators of shared-risk ecosystems that combine export finance, concessional capital, multilateral guarantees, and private investment. This could include co-guarantees between ECAs, DFIs, and MDBs to share exposure and pool due diligence, donor-funded first-loss or concessional tranches improve project affordability while preserving commercial integrity, and dedicated development-oriented financing windows within ECAs applying long-term, resilience-focused principles to infrastructure critical to economic transformation and future trade generation.
These mechanisms can be designed to preserve export promotion as the central mandate while enabling engagement in markets previously deemed too risky. Over time, they can also contribute to stronger sovereign relationships and more predictable repayment behaviour.
A strategic partnership model
From an international relations standpoint, development-aligned ECAs can serve as a bridge between economic diplomacy and global development policy. When an ECA supports a renewable energy project in West Africa, for example, or a regional logistics corridor in East Africa, it is not just enabling exports but also advancing developmental impacts including energy security, market connectivity, and political stability.
In this approach, export finance serves as strategic partnership capital, aligning national economic interests with global public goods and strengthening the case for ECAs as instruments of inclusive growth.
Towards development-aligned export finance
The Berne Union community has long served as a platform for dialogue between ECAs, insurers, and policymakers on evolving best practice. The next phase of that dialogue should consider how ECAs can contribute more directly to sustainable, inclusive economic growth, particularly in high-risk environments where the development need and strategic payoff are greatest.
With modest reform to the OECD Arrangement and stronger collaboration with DFIs and MDBs, ECAs can help finance the infrastructure, institutions, and resilience that sustain trade itself. In doing so, they can show that commercial opportunity, sustainable development, and long-term resilience are no longer competing priorities, but mutually reinforcing objectives in an increasingly interconnected global economy.
This thought piece is intended to prompt discussion as ECAs expand their activity in developing markets. It does not represent a policy position of UK Export Finance.
