The Board of Directors of the African Development Bank Group on Monday, 4 December 2023 approved a USD 7 million Trade Finance Transaction Guarantee facility for NBS bank in Malawi to support small businesses.
This facility will provide 100% guarantee to international confirming banks (CBs) for the non-payment risk taken on NBS's trade finance transactions conducted on behalf SMEs, local corporates, and women-led businesses in Malawi. It will enable NBS to support the importation of fertilizer, medical supplies, and other strategic commodities. The facility is expected to support about USD 40 million of trade over the next three years and promote intra-Africa trade in line with the aspirations of the Africa Continental Free Trade Area (AfCFTA).
AfDB's Malawi country manager Macmillan Anyanwu stressed the importance of unlocking trade financing to support and scale up trade flows for a land-linked low-income economy like Malawi. "The facility is expected to promote the integration of Malawi's economy into regional and global trade networks which are critical for the country's growth," he said.
Dr. Kwanele Batshele Ngwenya, NBS's CEO also said, "NBS Bank has always been passionate about Malawi's economic development, and I am pleased with this milestone because the transaction underscores the commitment of NBS Bank and AfDB to the advancement of trade in Africa. Additionally, on our part, we are committed to an ongoing cordial relationship with AfDB for the benefit of our clients and Malawi at large."
About the AfDB's Transaction Guarantee (TG) instrument: The TG is one of the trade finance instruments offered by the Bank to support local banks in Africa. It was launched in 2021 and covers an array of trade finance instruments, including confirmed letters of credit, trade loans, irrevocable reimbursement undertakings, avalized bills and promissory notes, among others. Through this instrument, the Bank leverages its "AAA" rating to mitigate country risk and local bank counterparty for confirming banks. The TG is purposely tailored to the needs of letter of credit (L/C) Issuing Banks that are often compelled to provide cash margin for their L/Cs, have used up their L/C confirmation lines with correspondent banks or find it difficult to obtain those lines in the first place. The facility is available to all banks registered and operating in Africa who pass the Bank's due diligence process. AfDB also offers 3.5-year trade finance lines of credit to local banks to support importers and exporters. https://www.afdb.org/en/topics-and-sectors/initiatives-partnerships/trade-finance-program
Contact:
Media Contact: Romaric Ollo Hien, Communication and External Relations Department, African Development Bank, [email protected]
Technical Contact: Samson Kasuka, Senior Investment Officer, Financial Sector Development Department
