The African Development Bank (AfDB) has agreed to provide Bank of Africa Benin (BAB) a EUR 15 million (US$15.7 million) transaction guarantee facility to support imports of supplies and telecommunications equipment for local businesses and small- and medium-sized enterprises (SMEs).

Launched in 2021, the AfDB's transaction guarantee covers a range of trade finance mechanisms, including confirmed letters of credit (L/Cs), commercial loans, irrevocable reimbursement undertakings, guaranteed bills and promissory notes.

Facility outline

The transaction guarantee for BAB aims to support imports of supplies, production machinery and telecommunications equipment needed to drive Benin's industrialisation process.

Although support for agro-industry and light manufacturing industry are the main sectors targeted by this operation, it will also be made available to facilitate imports of basic necessities to satisfy short term local demand.

The facility will last three years and will also benefit women-led businesses. Target projects will be those that are least vulnerable to climate risks and have only a minor impact on greenhouse gas emissions.

L/C benefits

"This facility will allow the African Development Bank to provide a guarantee of up to 100 per cent to confirming banks to facilitate the confirmation of L/Cs and other similar trade finance mechanisms issued by Bank of Africa Benin to large local businesses and SMEs," says AfDB's head of trade finance, Lamin Drammeh.

By supporting imports of the supplies, equipment and production machinery needed to promote manufacturing industry, the AfDB says this facility aims to help contribute to the achievement of three of the development bank's strategic priorities: to feed Africa; to industrialise Africa, and to improve the quality of life of the people of Africa.

The facility is available to all banks registered and operating in Africa that have been through the AfDB's due diligence process.

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