The Productivity Commission has called for an overhaul of the Export Finance and Insurance Corporation, after finding that its business model did not meet its charter, that the corporation did not produce an adequate rate of return and that its governance processes were weak.In a report issued this week, the Commission has recommended that EFIC change its business model from operating in "market gaps" - where insurers and lenders are not able or are unwilling to provide services to exporters - to one of addressing market failures.The Commission said EFIC should stop dealing with large companies, which account for about 75 per cent of its transactions now, and focus on small- to medium-sized businesses.The Productivity Commission was given terms of reference last September, asking it to review the rationale for government involvement in the provision of export finance. In an issues paper published in October, the Commission said: "It is important to determine whether government involvement in the provision of export finance and insurance could improve the allocation of resources across the Australian economy."Government assistance to export activity is warranted only if it gives rise to an increase in community welfare through higher consumption and improved living standards. An increase in export activity alone is not sufficient to justify export assistance."In its final report, the Commission was particularly critical of EFIC's focus on doing business with large companies. More than three-quarters of the value of EFIC signings in 2010/11 were facilities provided to large corporate clients.Among its deals that year, EFIC provided a US$100 million export finance guarantee to the Wiggins Island coal terminal consortium for a A$3 billion project to increase coal export capacity at the Port of Gladstone.It provided a US$270 million insurance policy to Brookfield Australia for a rail project to upgrade the rail line from Morawa to Geraldton.And it provided a US$250 million export finance guarantee to the Santos liquefied natural gas project in Gladstone.Facilities for small- to medium-sized businesses accounted for about 20 per cent of EFIC's commercial account business. It signed 90 facilities with SMEs, worth about A$135 million.The report said: "In order for government intervention to increase exports and generate net benefits to the economy that intervention must target failures in financial markets that are impeding otherwise commercially viable export transactions. An imbalance between demand for and supply of capital is not a market failure. "The Commission has found no convincing evidence to indicate that there are regulatory or other barriers that impede access to debt or equity finance for large firms, or resource and infrastructure projects located in Australia that would justify EFIC's involvement."It is not evident to the Commission that there are market failures affecting the provision of capital to resource projects and related infrastructure in Australia that require intervention by the Australian Government through EFIC."In the Commission's assessment, some of EFIC's activities have a crowding-out effect that is distorting the allocation of resources within the economy"EFIC has not targeted its operations to address market failures but rather to areas that