THE African Development Bank (AfDB) has approved $450 million about (Rwf372 billion) trade finance facility for the African Export-Import Bank (Afreximbank).
The facility consists of a three-year $150 million unfunded risk participation agreement and a four-year $300 million loan to support exporters.
According to Dr George Elombi, the executive vice-president for corporate governance and legal services at Afreximbank, the composite facility will help to expand Afreximbank's risk bearing capacity for the confirmation of letters of credit and to support more trade through the provision of increased funding to financial institutions and corporate firms in Africa. The project is aligned with AfDB's priority goals, including lighting up and powering Africa, and helping to feed and industrialise the continent.
"It also seeks to support market integration and improve the quality of life for the people of Africa," Elombi said last week.
The funding will help boost intra-Africa trade, promote regional integration and contribute to the reduction of the trade finance gap in Africa.
Elombi said the current macro-economic challenges on the continent, like withdrawal of global banks from the African trade finance space, acute shortage of foreign exchange reserves following the end of commodity super-cycle, and widening trade deficits, pose a serious challenge to the continent's financial industry.
"Therefore, given Afreximbank's commitment to helping African economies diversify their exports, strengthen trade value chains and promote value addition, this facility will contribute to macroeconomic resilience in at least 28 countries. It will provide financing to more than 100 financial institutions and corporate firms and support at least $ 2.8 billion of trade in Africa over a 4-year period," he added.
The facility, according Geoffrey Kamanzi, the director for trade facilitation and negotiations at Private Sector Federation (PSF), will play a big role in strengthening export sector besides deepening intra-regional trade.
The African Export-Import Bank is the foremost pan-African multilateral financial institution devoted to financing and promoting intra and extra-African trade. The bank was established in October 1993 by African Development Bank, African governments, African private and institutional investors, and non-African investors.
Since 1994, it has approved more than $51 billion in credit facilities for African businesses, including about $10.3 billion in 2016.
Afreximbank had total assets of $9.4 billion as at 30 April 2016 and is rated BBB+ (GCR), Baa1 (Moody's), and BBB- (Fitch). The Bank is headquartered in Cairo but works with other development banks on the continent.