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On Wednesday, July 18, 2018, the Board of Directors of the African Development Bank approved an unfunded risk-bearing venture of an amount of US $ 250 million with ABSA Bank Limited.
This venture-participation agreement, which is part of the African Development Bank's trade finance operations, will enhance the ability of African issuing banks to leverage trade finance through a multi-sectoral approach
. Trade of US $ 2 billion in three years. The alignment of the facility to meet the acute market demand for trade financing in Africa through agriculture, transportation and manufacturing is in line with the Bank's objectives. to ensure that Africa industrializes, negotiates more and is able to feed itself. By extension, this RPA will also promote the development of the financial sector and regional integration.
Presenting the project to the Board, the Bank's Financial Sector Development Director, Stefan Nalletamby, presented strong arguments on how the RPA instrument continues to facilitate trade on the continent; thus helping to reduce Africa's trade finance gap. "This facility, through a 50/50 risk-sharing approach, will help promote overall economic growth on the African continent through increased facilitation of the import-export activities of African businesses and SMEs, and to increase intra-African and regional trade. Most African issuing banks are relatively small and have difficulty obtaining adequate trade finance facilities from international confirming banks to support African importers and exporters. Risk reduction (the idea that international banks reduce their credit risk in developing markets or abandon them altogether) has exacerbated this already disastrous situation, especially for African SMEs.
The additionality of the Bank therefore lies in its use. AAA's "credit to provide more comfort to allow ABSA to increase its risk-taking appetite on local banks in Africa and provide them with increased trade finance facilities. broadening and deepening of Africa's financial systems.
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