The African Export-Import Bank (Afreximbank) is to introduce a special guarantee facility to enable African processing plants to secure long-term export contracts with bank backing.

The Contract Availability Guarantee (CAG) aims to boost exports and supports the bank's existing facilities for exporters, which include Afreximbank's letter of credit (L/C) guarantee scheme.

Contract risks

Afreximbank's president, Jean-Louis Ekra, announced the new facility ahead of the bank's annual general meeting (AGM) in the Zambian capital, Lusaka.

In an address to the meeting of Afreximbank's Advisory Group on Trade Finance and Export Development in Africa held in the run-up to Afreximbank's 22ndAGM, Ekra said that the CAG aims to encourage international banks to support the financing of African processing plants.

The facility would cover risks associated with situations where the contract against which financing had been provided becomes unavailable after an agreed period.

L/C risks

The African Correspondent Banking and Letter of Credit Confirmation Facility, otherwise known as Africorrbanking, is already made available by Afreximbank to eligible exporters.

It was introduced so that the bank can share, partially or fully, the credit risk of African banks opening L/Cs to be confirmed by international banks.

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