India should allow insurance of credit in the domestic market, says Jean-Marc Pillu, chief executive of France’s biggest credit insurance company Coface. In an interview with ET’s Saikat Das, Pillu says it is one way of reducing cost of funds for small & medium enterprises. Edited excerpts:
What is your assessment of India, given the bad loans in the banking industry and a possible revival of the economy?
India is a very important market for the Coface Group. We are very keen on developing trade credit insurance in India. Credit insurance supports the SME segment as it provides factoring policies to banks and factors who finance this segment. But, since regulations in India do not allow credit insurers based here to insure banks and factors, the SME segment loses out on securing finances against their trade receivables at competitive terms.
What needs to be done to make SME funding better?
If the regulators ease these restrictions, backed by credit insurance, banks and factors will be able to factor the receivables of the SME sellers (domestic and exports), thereby giving this very important segment of companies in India access to finance at competitive terms.
We have more than 30% of business in emerging countries, including India.Among emerging countries, the AsiaPacific region is very promising. We are looking at a large proportion of the group from AsiaPacific, especially English-speaking countries.
How are you doing in India?
Coface has been present in India since February 2001 through its subsidiary Coface India Credit Management Services. Coface has three offices in India: Mumbai (headquarters), Delhi and Bangalore. Coface has been developing trade credit insurance in India, both domestic and exports, with four local partners -ICICI Lombard General Insurance, IFFCOTokio General Insurance, Bharti AXA General Insurance and Universal Sompo General Insurance -by providing reinsurance support through its Singapore branch.
What do your clients tell you about India?
I am optimistic about India. GDP is accelerating and inflation is under control. The Modi government is doing (its utmost) to give a push to infrastructure spending. I see the evolution.Twothree years ago, I would not have been as positive. That is the reason I am here today. I am visiting people.
Given the liberal banking rollover of loans in case of imminent defaults, is there no incentive to buy insurance? How do you get more locals as clients?
We have three categories of companies: multinationals, big but not multinationals, small and medium entrepreneurs. Being a multinational group, it gives us a lot of financial strength. It allows us to decrease our costs because the same people are working for a lot of companies in a lot of countries inside the group. We have sufficiently expanded geographically.
For example, if an Indian company exports to Greece and the importing company defaults, our investigators, being present worldwide, will go to that company. The experience, too, can be used by our entire group.
We have clients and we protect them from their clients.
What do we need to do to improve our system?
We are in a process of organic growth.Plenty of companies are to be creditinsured. It could be nice if in addition to protecting corporates, we could also protect banks. This is wish for India. If you secure clients, it secures banks.
The Indian government has passed the Insurance Bill. Aren’t you enthused?
Forty-nine percent is better than 26%, but 51% would be even better. We must have a control on what we are doing everywhere. Minority shareholding is not an appropriate scheme for us. But this will not prevent us from growing business in India. The Bill was pending for a long time and now it is passed. That gives the international community some positive vibes.
The fear of `Grexit’ has returned to haunt markets? What is your reading of it?
The consequence would be much lower now than four years ago. Four years ago, it would have destabilised the whole euro zone scheme. I don’t think this event will anymore be considered a systemic case, putting in danger the euro zone. I don’t think it will destabilise the euro zone any more; that’s why you see more messages issued on the German side saying `If they want to get out, they could get out’. From a systemic point of view, it will not damage the euro zone anymore. From a pure financial point of view, it will create some disturbances. You still have a lot of entities having Greek banks in their arms.Here, again, they have put aside some provisions to cover a big part of it.
Source: Economic Times