The African Development Bank (AfDB) has approved a EUR 5 million (US$5.3 million) trade finance transaction guarantee facility for Ecobank Centrafrique, the subsidiary of the Togo-based Ecobank Group that operates in the Central African Republic (CAR).

The facility allows Ecobank Centrafrique to enter in transactions with up to 100 per cent guarantees to confirming banks against non-payment risks on letters of credit (L/Cs) and similar trade finance instruments issued by the bank for local businesses and small- and medium-sized enterprises (SMEs).

Import support

The guarantee is targeted at facilitating imports of essential goods and inputs in key sectors of the CAR's economy, including telecommunications, agribusiness, and manufacturing.

"The transaction guarantee is a powerful tool from the African Development Bank's private sector portfolio, opening doors for local businesses in the CAR to access essential imports," says the AfDB's country manager for the CAR, Mamady Souaré, who expects more agreements in the future.

"We hope this initiative will pave the way for more bank group private sector financing for Central African enterprises," he says.

L/C confirmations

The benefits are clear according to AfDB's head of trade finance, Lamin Drammeh. "This facility will strengthen trade finance services by providing critical guarantees for confirming L/Cs issued on behalf of Ecobank Centrafrique's corporate clients," he says.

Managing director of Ecobank Centrafrique, Félix Landry Njoume, says the transaction guarantee should enable his bank to expand its provision of import credit for goods and services to SMEs and local businesses, which are, he believes, the drivers of growth and job creation, but which very often find it difficult to access bank financing.

"This facility will be a lever for SMEs to meet the high-priority sustainable development challenges and achieve a positive impact on the Central African economy," he concludes.

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