The African Export-Import Bank (Afreximbank) has approved a landmark US$1.5 billion funding that unlocks the start of the bank's operations in the Caribbean. It enables member states of the Caribbean Community (CARICOM) that have ratified the partnership agreement with Afreximbank to tap into the bank's various financial instruments.

The bank's short-term guarantee products aim to promote intra- and extra-African trade and include the Afreximbank letter of credit (L/C) confirmation guarantee facility, a line of credit for providing guarantees in favour of confirming banks.

It can also apply to standby L/Cs as well as other trade finance instruments such as bills of exchange accepted by African issuing banks, guarantees, and promissory notes issued or guaranteed by African banks.

Signatories

The approval of Afreximbank's funding to commence operations in the Caribbean follows the accession of 9 of the 15 CARICOM member countries to the Afreximbank Partnership Agreement launched last September in Barbardos.

Recently ratified by Barbados and in the process of being ratified by the other 8 signatories, the treaty remains open for accession to the 6 CARICOM members that have yet to sign.

Accession benefits

Upon accession to the agreement, CARICOM member countries become participating states in Afreximbank.

Those states will be able to access the bank's financing facilities that support various identified economic sectors including tourism, healthcare, renewable energy, shipping, mining, agriculture and agribusiness, air links, and aquaculture.

Afreximbank will also work to support local financial institutions to source finance for small- and medium-sized enterprises.

Diaspora trading

The agreement fits with Afreximbank's efforts to promote and develop south-south trade and specifically trade between Africa and the Caribbean in line with its diaspora strategy.

Afreximbank defines intra-African trade as the flow of goods and services between or among African countries as well as the flow of goods and services between Africa and Africans in the diaspora.

More details of Afreximbank's L/C support facilities can be found here.

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