The African Development Bank (AfDB) is continuing its drive to sign African banks up to its support facilities for letters of credit (L/Cs) by agreeing a US$15 million trade finance transaction guarantee facility with NMB Bank Zimbabwe (NMB).

In recent months AfDB has signed similar agreements with several banks, including NBS Bank in Malawi (DC World News, 20 December 2023) and Bank of Africa Tanzania (DC World News, 5 January 2024).

Unlocking trade finance

The agreement with NMB aims to unlock trade finance opportunities for Zimbabwean small- and medium-sized enterprises (SMEs) and those in agri-business and trade distribution value chains.

The facility offers up to 100 per cent coverage to confirming banks, effectively mitigating non-payment risks linked to NMB's trade transactions on a per-transaction basis.

It is tailored to support trade between Zimbabwe and other African countries and with overseas markets by significantly diminishing the risk for international financial institutions actively engaging in trade finance activities with Zimbabwean businesses.

Challenges for SMEs

African SMEs often face challenges in accessing trade finance compared to their larger counterparts according to AfDB, which says this initiative directly addresses this gap in banking provision.

The project aligns with the AfDB's country strategy paper for Zimbabwe 2024-2026, which prioritises private sector development. It is also aligned with several priorities of the Zimbabwe Vision 2030, which aims to transform Zimbabwe into a prosperous and empowered upper-middle-income society by 2030.

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