The African Development Bank (AfDB) has agreed a $250 million trade financing deal with ABSA, in its efforts to foster inter and intra Africa trade, and reduce trade financing gap on the continent.
According to The Guardian, the deal, a three-year facility signed on the 12th November at the just concluded Africa Investment Forum was tagged: “Risk Participation Agreement (RPA)”. The facility was arranged in partnership with ABSA, a Pan-African company which has footprints across economies in the region.
Details: AfDB and ABSA will share the default risk on a portfolio of eligible trade transactions originated by African Issuing Banks (IBs), subject to confirmation by ABSA for the duration of the facility.
Meanwhile, ABSA leveraging AfDB’s AAA rating will underwrite trade transactions issued by IBs in sectors such as agriculture, energy, and light-manufacturing with a focus on Small and Medium-Sized Enterprises (SMEs) in low-income African countries.
The AfDB’s part under the RPA is to assume up to 50% (and 75% in special cases) risk on every underlying transaction issued by the IBs, while ABSA will confirm such a transaction and bear not less than 50% of its underlying risk.
Since 2013, AfDB’s RPA programme has braced over 16 issuing banks with about $650 million limits in Southern Africa and supported over $4 billion in trade across other African countries, with $938 million of that being intra-Africa trade.
The Vice President for Infrastructure, Private Sector and Industrialization, AfDB, Pierre Guislain, said, “The RPA facility is one of the tools employed by the bank to alleviate poverty and achieve robust economic growth and sustainable development on the continent through increased trade facilitation of import-export activities of African local corporates and SME’s; enhanced inter and intra-Africa trade; and regional integration.
“This is consistent with the bank’s High 5s focus to Industrialize Africa, Light up Africa, Integrate Africa, Feed Africa, and Improve the Living Standards of Africans.”