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The Export Credit Agency, a government-backed firm specifically established to help exporters secure bank loans to finance trade, will officially begin operations on Tuesday under the commercial name of Indonesia Eximbank.

The government is hoping the agency will open up markets for existing exporters and provide small- and medium-sized industries, long neglected by banks, with much-needed financing.

Finance Minister Sri Mulyani Indrawati said the government had injected Rp 4 trillion ($396 million) as initial working capital for Eximbank, but may add another Rp 2 trillion next year to boost the agency’s trade financing ability.

Trade Minister Mari Elka Pangestu, who spoke at the official ceremony for the agency’s launch, said she expected it to help exporters overcome tight liquidity, which had made it hard for them to get loans from commercial banks.

With financing from Eximbank, exporters were expected to be able to penetrate new markets as part of a government plan to diversify into nontraditional markets, Mari said.

“There are many prospective markets in the Middle East, in Russia, in Kazakhstan and Uzbekistan, which have a huge amount of money to spend from their oil resources,” she said.

Mari added that new export markets currently contributed to only 3 percent to 4 percent of Indonesia’s total export value, but the government hoped contributions could rise to 5 percent to 7 percent once Eximbank played a more important role.

Eximbank is a revamp of PT Bank Ekspor Indonesia, a government-owned lender that had limited success in its core business of financing exports.

Bank Ekspor, which operated a state bank, was considered ineffective in giving out loans because, like other commercial banks, it was expected to rely on deposits to fund lending. Tightly bound by central bank regulations on loan disbursement, it was also reluctant to lend to small- and medium-sized enterprises. When the global economic crisis hit, it also stopped lending to larger exporters.

Despite its name, the new Eximbank is not actually a bank, but rather a state agency with government backing to provide financing, insurance, guarantees, and consultancy services to exporters.

Set up under a new law, which is not specifically tied to Bank Indonesia regulations, the government expects it to be more able to lend to existing companies in the sector as well as new export-oriented ventures.

Ernovian Ismy, the secretary of Indonesian Textile Producers Association (API), said he had high hopes that Eximbank would help finance textile exporters, adding that continued government support would be vital if it were to succeed.

He said the industry was in great need of financing support for export activities to improve international competitiveness.

The sector employs an estimated three million workers directly and indirectly and was expected to contribute $11.6 billion to the government in foreign exchange revenues.

But despite the contribution, the industry’s exposure to the global economic crisis meant it was currently on a commercial bank blacklist for loans, Ernovian said.

In July, Eximbank received Rp 1 trillion ($100 million) in a trade-financing loan from Japan through the Japan Bank for International Cooperation, raising its capital to Rp 5 trillion.

With the current capital ratio, Eximbank is able to leverage its export financing ability up to five times its capital, to Rp 25 trillion ($2.5 billion).

Eximbank executive director Mahendra Siregar said the agency was likely to eventually issue its own bonds, “but we will evaluate this plan carefully based on our targets and our needs.”

Although Indonesian companies have a competitive advantage in export-oriented industries such as mining, forestry, agriculture and aquaculture, their potential has not been fully realized because of the lack of an integrated government policy on exports.