The African Development Bank (AfDB) has approved a US$7 million trade finance guarantee facility to Access Bank in the Democratic Republic of Congo (DRC).

The AfDB will now be able to provide up to a 100 per cent guarantee to confirming banks for the non-payment risk from the confirmation of letters of credit (L/Cs) and similar trade finance instruments issued by the bank

SMEs targeted

The facility has been approved by the AfDB so that Access Bank, which is a subsidiary of Nigeria's Access Bank, can better support DRC-based small- and medium-sized enterprises (SMEs) and local businesses.

"This facility will help improve the provision of trade finance services by providing essential guarantees for the confirmation of L/Cs issued for SMEs, Access Bank DRC's target client group," according to the head of AfDB's trade finance division, Lamin Drammeh.

Over the next three years, the AfDB will also support the import of essential goods and various inputs in such key economic sectors as health and agriculture, as well as US$40 million in trade.

AfDB's trade finance support

The AfDB's transaction guarantee was launched in 2021, and covers a range of trade finance instruments including confirmed L/Cs, commercial loans, irrevocable repayment commitments, endorsed drafts and promissory notes.

This instrument enables the AfDB to leverage its AAA rating to mitigate country risk and counterparty risk for confirming banks. The facility is available to all banks that are registered and operating in Africa which have passed the AfDB's due diligence process.

In addition to transaction guarantees, the AfDB also offers credit lines to African commercial banks for trade finance to support importers and exporters.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.