The African Development Bank (AfDB) has approved a US$450 million trade finance package for the African Export-Import Bank (Afreximbank).

The facility aims to help expand Afreximbank's risk bearing capacity for the confirmation of letters of credit (L/Cs) and support more trade through the provision of increased liquidity to local financial institutions and corporates in Africa.

Trade finance gap

The composite facility consists of a three year US$150 million unfunded risk participation agreement in the form of guarantees alongside a four year US$300 million trade finance line of credit.

It particularly aims to boost intra-African trade, promote regional integration and contribute to the reduction of Africa's trade finance gap.

Priority goals

The facility is aligned with AfDB's five priority goals: to light up and power Africa; to feed Africa; to industrialise Africa; to integrate Africa, and to improve the quality of life for the people of Africa.

It aims to help African economies diversify their exports, strengthen trade value chains and promote value addition and contribute to macroeconomic resilience in at least 28 countries.

It aims to provide financing to more than 100 financial institutions and corporates and support at least US$2.8 billion of trade in Africa over four years.

L/C flows

The AfDB facility will also help Afreximbank fulfill its ambitions for L/C flows outlined in its recently unveiled five-year strategic plan.

The Pan-African trade finance provider's Impact 2021 plan aims, in the period 2017-21, to support at least US$90 billion in trade, a very substantial increase in funding compared with previous years. (DC World News, 13 March 2017)

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.