The African Development Bank (AfDB) has approved a EUR 100 million (US$107 million) trade finance funded risk participation agreement (RPA) facility with Attijariwafa bank, which is based in Morocco and has a footprint in 15 African countries.

The facility is expected to boost letter of credit (L/C) flows and addresses the issue of international banks reducing their commitment levels and the number of their correspondents in Africa, partly due to perceived high African risk.

This agreement comes amid toughening regulatory capital and compliance standards on the continent and will enable Attijariwafa bank to support local banks committed to local small- and medium-sized enterprises (SMEs) grappling to find financing and confirmation lines from their correspondent banks.

Trade finance demand

The risk sharing scheme is intended to meet Africa's growing demand for trade finance in vital economic sectors, including agriculture and agri-food, renewable energy, manufacturing, health, telecommunications, transport and services.

It also aims to contribute to economic diversification, job creation and additional tax revenues for several African states, thus strengthening their economic resilience.


African issuing banks whose trade finance activity is constrained by insufficient trade confirmation lines from international confirming banks are expected to be direct beneficiaries of the facility.

Intended indirect beneficiaries are local SMEs in several African countries that rely on issuing banks located in Africa to meet their trade finance commitments.

Agreement outline

The AfDB's RPA is an arrangement under which it and a partner bank share the default risk on a portfolio of trade finance transactions designed to give regional and international commercial banks partial cover for their trade finance operations in Africa.

The partner bank performs the credit risk analysis on the issuing banks and originates, processes, and monitors the transactions.

Earlier this year, the AfDB approved a US$175 million trade finance funded RPA facility with the Trade & Development Bank, the trade and development financial institution operating in eastern and southern Africa (DC World News, 3 August 2022).

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