Two more African banks have signed up for facilities provided by development institutions that guarantee trade finance instruments, including letters of credit (L/Cs).

Agreements with Ecobank Malawi and Bank of Africa Tanzania Limited (BOAT) follow hot on the heels of the African Development Bank's (AfDB's) approval of a US$7 million trade finance transaction guarantee facility for NBS Bank in Malawi (DC World News, 20 December 2023).

Lack of credit lines

BOAT has also signed a trade finance transaction guarantee facility with AfDB, with the latter providing a guarantee to confirming banks for the non-payment risk arising from the confirmation of L/Cs and similar trade finance instruments issued by the Tanzanian bank.

According to AfDB, the facility was approved to compensate for the lack of adequate credit lines from international confirming banks that has hampered BOAT's ability to support its clients.

The facility will support imports of critical inputs such as fertiliser, pharmaceuticals, solar energy panels, farm machinery and other intermediate goods needed by Tanzania to revive its agriculture and manufacturing sectors.

French support

Proparco, a subsidiary of the French development agency Agence Française de Dévelopement, has signed a US$10 million trade finance guarantee with Ecobank Malawi.

The agreement aims to enable the pan-African bank to secure confirmation lines on L/Cs for importation of strategic commodities such as fertilisers, basic foodstuffs and strategic raw materials.

A statement from Ecobank Malawi says the trade finance guarantee will thus help facilitate the development of trade relations between Malawian importers and international exporters -- a crucial enabler for the country's economic growth.

FARM initiative

Proparco's facility for Ecobank Malawi forms part of the Food & Agriculture Resilience Mission (FARM) initiative launched in 2022 by French President Emmanuel Macron, alongside the European Union, the G7 and the African Union. It is aimed at ensuring food security in the most vulnerable countries.

It aims to provide a strong response to Malawi's food insecurity challenges, exacerbated by the Russia-Ukraine war and Cyclone Freddy in February 2023.

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