TheCable

The African Development Bank (AfDB) has announced the approval of a $50 million multinational trade finance risk participation agreement (RFA) facility with Standard Chartered Bank. 

AfDB, in a statement on Wednesday, said the agreement is expected to boost intra-Africa trade, promote regional integration, and contribute to the reduction of the trade finance gap in Africa in line with the African Continental Free Trade Area (AfCFTA).

According to the statement, they will both share the default risk on a portfolio of eligible trade transactions originated by African issuing banks and indemnified by Standard Chartered Bank.

AfDB said beneficiaries for the $50 million facility are issuing banks in Africa whose ability to grow their trade finance business has been constrained by inadequate trade confirmation lines.

“We are excited about finalising this facility with Standard Chartered Bank as it offers us the flexibility to use our strong AAA-rated risk-bearing capacity to increase access to trade finance and boost intra/extra- African trade on the continent, in support of the AfCFTA,” Stefan Nalletamby, AfDB financial sector director, said.

“This partnership is expected to catalyse more than $600 million in value of trade finance transactions across multi-sectors such as agriculture, manufacturing and energy over the next three years.”

The statement added that the facility is aligned with AfDB’s high five goals, which include light up and power Africa; feed, industrialise, and integrate Africa; and improve the quality of life for Africans.

In 2019, AfDB estimated the trade finance gap in Africa at $81 billion and noted that SMEs and other domestic firms have greater difficulty in accessing funds compared to multinational corporations.