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ABIDJAN (Capital Markets in Africa) – The Board of Directors of the African Development Bank (AfDB) approved on Wednesday, May 29, 2017 a USD 450 million Trade Finance Package for the African Export–Import Bank (Afreximbank). The facility consists of a 3-year USD 150 million unfunded Risk Participation Agreement (guarantees) and a 4-year USD 300 million Trade Finance Line of Credit. This composite facility will help to expand Afreximbank’s risk bearing capacity for the confirmation of letters of credit and to support more trade through the provision of increased liquidity to local financial institutions and corporates in Africa.
The project is aligned with AfDB’s High 5 priority goals: (i) light up and power Africa; (ii) feed Africa; (iii) industrialize Africa; (iv) integrate Africa; and (v) improve the quality of life for the people of Africa. It will boost intra-Africa trade, promote regional integration, and contribute to the reduction of the trade finance gap in Africa. Given Afreximbank’s commitment to helping African economies diversify their exports, strengthen trade value chains and promote value addition, this facility will contribute to macroeconomic resilience in at least 28 countries. It will provide financing to more than 100 financial institutions and corporates and support at least USD 2.8 billion of trade in Africa over a 4-year period.
AfDB’s additionality in this project stems from (i) its ‘AAA’ rating that will enable Afreximbank enhance its trade finance confirmation capabilities; (ii) its ability to avail medium-term liquidity support to Afreximbank to provide appropriate trade finance to local banks and corporates in Africa; and (iii) its demonstrable appetite for Africa risk.