To support trade flows to and from Mozambique and to strengthen the country's financial sector, the International Finance Corporation (IFC) has announced the agreement of a new trade finance guarantee facility that includes letter of credit (L/C) support to First Capital Bank Moçambique (FCBM).

The facility, which FCBM will access by joining the IFC's the Global Trade Finance Programme (GTFP), will provide payment risk cover for trade-related transactions extended by the Mozambican bank to their clients, including micro-, small-, and medium-sized enterprises in Mozambique's trade and agricultural sectors.

The facility made available by the IFC, the World Bank Group's private sector arm, aims to help boost Mozambique's exports and imports, supporting economic activity and the delivery of goods and services.

Transaction-specific guarantees

The guarantees will be transaction-specific and could take the form of a variety of underlying instruments, including L/Cs, trade-related promissory notes, bills of exchange, bid and performance bonds, and advance payment guarantees.

This new engagement is supported by IFC's Africa Trade and Supply Chain Recovery Initiative (ATRI), an IFC effort aimed at developing trade in Africa and reducing its reliance on imports through financial support and advice around best practices in trade finance.

Benefits

By joining IFC's GTFP, FCBM will be able to engage with more than 300 other international correspondent banks, further supporting its trade transactions.

IFC's support for FCBM's trade lines should also enable the bank to grow its overall trade finance business, strengthening competition in the sector.

GTFP to date

To date, IFC has issued guarantees for over US$100 billion trade related transactions globally under the GTFP umbrella, with a notable portion dedicated to Africa.

In the 2023 fiscal year alone, IFC extended US$9.1 billion in guarantees globally, with US$3.5 billion allocated to Africa.

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