The AfDB’s Unfinanced Risk Participation Agreement is a trade finance instrument designed to support local banks in Africa. It offers partial risk coverage for trade finance operations, generally assuming 50% of the risk.
Commercial partners are selected on the basis of criteria such as their African portfolio, their support for intra-African trade and the quality of their credit approval processes.
This is the framework for the agreement between the AfDB and the Trade and Development Bank of Eastern and Southern Africa (TDB). It aims to promote intra-African trade, support regional integration and reduce the trade finance gap in Africa, in line with the objectives of the African Continental Free Trade Area (AfCFTA).
The AfDB will provide guarantee coverage of 50%, rising to 75% for transactions in low-income countries and countries in transition, in partnership with TDB. This will benefit a number of eligible local and regional banks in the Common Market for Eastern and Southern Africa (COMESA) region that are active in trade finance. The facility is expected to support around $1.8 billion of trade over the next three years.
“We are delighted to be working with TDB, a strong partner with in-depth knowledge and an extensive network in Africa, with the shared ambition of supporting trade in the region,” said Nwabufo Nnenna, ADB Director General for East Africa, quoted in the note received by APA on Wednesday.
The President and CEO of Trade and Development Bank, Admassu Tadesse, for his part, stressed that the TDB Group was “very pleased to continue to build on its strategic partnership and tailored risk-sharing facilities with the African Development Bank Group to develop trade finance and other offerings in a region where large gaps
remain in access to trade finance, among others, and where major international banks are disengaging and reducing their risk appetite.”
In addition to the Risk Participation Agreement, the AfDB is offering a three-year Trade Finance Transaction Guarantee Facility to support the confirmation of trade finance transactions by local banks.
ARD/te/fss/abj/APA