GAO: Export-Import Bank Needs Better Outreach to Small Firms

Savvy small businesses are increasingly looking to export their goods or services as a way to bump up their bottom lines in this weak U.S. economy. But the Export-Import Bank, which provides loans and insurance to support U.S. exports, needs to do a better job in helping small firms, according to the Government Accountability Office.

The bank provides loans, guarantees and insurance to support U.S. exports, and in 2006 Congress required that Ex-Im develop performance standards for the bank's assistance to small businesses, especially those owned by socially and economically disadvantaged individuals and by women.

In fiscal 2007, Ex-Im authorized more than $12 billion in loans, guarantees, and insurance. Of this amount, about $3.4 billion -- or about 27 percent -- directly supported U.S. small businesses, bank data show.

The GAO released a report (pdf) last week recommending that Ex-Im establish better performance standards, improve its measurable targets and time frames and take steps to establish a measure for financing for small businesses owned by disadvantaged individuals. The bank agreed with the GAO's suggestions.

The 34-page study said that overall the bank does have some performance standards in place, but it's in the very early stages of measuring their effectiveness.

The report said that while Ex-Im has established some measures for outreach to small firms, "11 out of 27 measures lack measurable targets and time frames to fully evaluate progress toward meeting the performance standards."

Additionally, "none of the standards directly addresses the function calling for increased outreach to businesses employing fewer than 100 employees."

Ex-Im also has no measurements for monitoring progress toward its performance standard for financing small businesses owned by socially and economically disadvantaged individuals and by women.

In discussions with the GAO investigators, Ex-Im officials said that developing measures for financing for these businesses is challenging because it is difficult to obtain reliable data. "Specifically, they stated that Ex-Im cannot require small businesses to report this type of ownership status information on their applications and available data sources are not adequately reliable for this use," according to the report.

Congress has taken a long-standing interest in the bank's outreach to small firms. Congress required Ex-Im to make available for fiscal 1986 and thereafter at least 10 percent of its aggregate loan, guarantee, and insurance authority for financing exports by small businesses. In 2002, Congress increased the percentage to 20 percent. Congress also requires Ex-Im to report annually on the number of its transactions that directly benefit small business and to estimate the number of small businesses Ex-Im indirectly supports as suppliers to companies receiving Ex-Im financing.

The report was sent July 17 to the chairmen and ranking members of the House Financial Services and Banking, Housing and Urban Affairs committees.

By Sharon McLoone |  July 21, 2008; 10:26 AM ET Watchdogs
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