US$50m boost for African banks

In a move to support African banks who are looking to expand their trade finance operations, the African Development Bank (AfDB) yesterday approved a US$50-million unfunded Risk Participation Agreement with international commercial bank Commerzbank AG.

According to AfDB Financial Sector Development director, Stefan Nalletamby, most African banks are small and struggle to obtain adequate trade finance facilities from international banks to support African importers and exporters.

“This intervention will improve market access by African issuing banks, corporates and SMEs,” he said.

The agreement leverages the AfDB’s “AAA” credit rating as insurance to the international bank in order for it to provide its support.

It will also help to address trade finance market demand in key economic sectors such as agriculture and manufacturing.

The Risk Participation Agreement will run for three years as a 50/50 arrangement and is expected to support around US$700 million of trade in Africa over this period.

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