The Board of Directors of the African Development Bank (AfDB) approved on Wednesday, April 30 in Tunis an unfunded €40-million Risk Participation Agreement (RPA) with BNP Paribas to support the trade finance activities of African issuing banks. The facility will help address critical market demand for trade finance in Africa by supporting trade in vital economic sectors such as agribusiness and manufacturing. Moreover, it will foster financial sector development and regional integration, and contribute to government revenue generation.
The majority of African banks have weak capital bases which constrain their ability to obtain adequate trade limits from international confirming banks and to undertake sizeable transactions that could have substantial development impact. AfDB's additionality lies in the use of its "AAA" rating to share trade risk with BNP Paribas and enhance the trade finance capacity of African banks and financial institutions, thereby expanding trade and strengthening regional integration. Further, BNPP has more than 100 years of experience in trade, over 200 correspondent banking relationships, 9 subsidiaries, 3 branches and deal footprint in more than 20 non-presence countries in Africa.
Through a 50-50 risk-sharing structure, the RPA will broaden the availability of trade finance across Africa over a three-year period by targeting SMEs and indigenous firms. BNP Paribas will match AfDB's undertaking in every transaction, thereby creating a portfolio of up to €80 million. Including rollovers, this facility is expected to facilitate approximately €500 million of trade in intermediate and finished goods, raw materials and equipment to support the continent's economic growth.
About BNP Paribas
BNP Paribas is the largest French banking group and one of the top four banks globally in terms of total assets. BNPs operations are split along three strategic lines namely retail, corporate and investment banking and investment solutions. BNP Paribas is a recognized global leader in trade finance with more than 250 experts located in over 100 trade centres across 60 countries. BNP Paribas has a strong network of partner banks in Africa and a large portfolio of commodity and non-commodity transactions across the continent.
