Letters of credit (L/Cs) have helped the African Export-Import Bank (Afreximbank) to become perhaps the bank with the most extensive reach on the continent according to the bank's president, Benedict Oramah.

Established in 1993 to promote and finance extra- and intra-African trade, the bank says it is also using cutting edge technology in its L/C operations.

L/C progress

Speaking at the bank's annual general meeting this week, Oramah said Afreximbank has made significant progress in improving access to L/Cs and other trade services across the continent.

Between 2020 and 2022, the bank disbursed US$45 billion across Africa, enabling many governments, central and commercial banks, corporate bodies, and small- and medium-sized enterprises to weather the combined effects of covid-19 and the Russia-Ukraine crisis he added.

AI support for L/Cs

The bank's executive vice president with responsibility for finance, administration and banking services meanwhile has told African Business that Afreximbank now uses an AI enhanced system to help manage documents so that L/Cs and guarantees can be processed relatively simply and straightforwardly.

"When you lend at the scale that we do, you cannot afford to make mistakes," Denys Denya says.

Local currency trade transactions

In January 2022, Afreximbank and the African Union announced the establishment of the Pan-African Payment and Settlement System (PAPSS), a real time gross settlement infrastructure to facilitate cross-border payments in distinct local currencies.

Oramah says that the system is currently operating using US dollars while the bank works with central banks across Africa with the aim of creating an exchange rate mechanism encompassing 42 currencies.

The bank also has SWIFT communication arrangements with almost 500 of the 600 regulated commercial banks in Africa, making Afreximbank perhaps the bank with the most extensive reach on the continent according to Oramah.

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