West African importers and exporters stand to benefit from a new two-year US$32 million trade facility to be established by the International Finance Corporation (IFC) and Banque Belgolaise.

Under the West Africa Trade Enhancement Facility, the IFC will guarantee L/C confirmations made by Banque Belgolaise to eight West African banks. The IFC's guarantee will cover up to 50 per cent or US$16 million of the total L/C amount.

Benefits for enterprises

The facility aims to establish a more competitive and lower-cost L/C market for importers that need help with financing to import capital goods and raw materials.

According to IFC's director for Sub-Saharan Africa, Haydee Celaya, the facility will allow the IFC to reach a large number of importers, particularly among small and medium enterprises.

"Assuming the average transaction time is four months, the facility will turn over three times a year, resulting in the provision of US$192 million for trade finance purposes, if fully utilised over the two-year period," she says.

More competitive banks

The facility also aims to put local participating banks on a footing whereby they will be able to compete with trade services provided by multinational banks.

The facility will "increase the availability of trade finance to local importers by supplementing country limits available to commercial banks, promote confidence in the private banking sector, and build the reputation of the selected banks in the international market," according to IFC's director for Global Financial Markets, Karl Voltaire.

Participating banks will initially be located in six countries - Burkina Faso, Guinea, Cote d'Ivoire, Benin, Senegal and Cameroon.

Paris confirmation

Headquartered in Brussels, Banque Belgolaise, which has experience in trade finance in Africa, has offices in 15 African countries where it provides commercial, merchant, and private banking services.

The bank's French subsidiary, based in Paris, will act as the confirming bank for the facility.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.