African Development Bank Backs Trade Finance Pact
The African Development Bank said strong partnerships between public and private finance players are essential to realize the continent's immense economic potential.
ABIDJAN, Ivory Coast— The African Development Bank announced approval Tuesday of a $150 million trade finance agreement with the Trade and Development Bank to expand intra-Africa trade, writes Winston Mwale.
The unfunded risk participation pact aims to boost cross-border commerce, promote regional integration and help close Africa's trade financing gap.
The African Development Bank will provide 50% guarantee coverage on transactions by qualifying banks in the Common Market for Eastern and Southern Africa region.
Coverage rises to 75% for low income states.
"Supporting African trade is a key priority. Trade finance drives growth and is critical for cross-border trade," said bank Director General Nnenna Nwabufo.
Trade and Development Bank President Admassu Tadesse said the deal builds on an ongoing strategic partnership between the institutions.
"There continue to be large gaps in African trade finance access as major banks withdraw," Tadesse said. "This facility will help scale up offerings."
The pact is forecast to back $1.8 billion in trade over three years. It aligns with the African Continental Free Trade Area's goals.
The African Development Bank also runs a separate 3-year trade finance guarantee program for local banks to confirm transactions.
Officials said ensuring trade finance access is vital for development.
The bank's backing aims to energize commerce as a engine of growth and prosperity.
"Trade finance drives economic growth and is critical for cross-border trade in emerging markets," Nwabufo said.
The African Development Bank and Trade and Development Bank have an ongoing collaboration to spur investment and expand economic opportunity across Africa.
Tadesse said the institutions' risk-sharing trade initiatives leverage their financing capacity and risk mitigation tools.
The cooperation also pools market knowledge and networks.
The African Development Bank said strong partnerships between public and private finance players are essential to realize the continent's immense economic potential.