African Development Bank Group has announced the approval by its Board of Directors of a US$50 million Trade Finance Unfunded Risk Participation Agreement (RPA) facility between the African Development Bank and Standard Chartered Bank.
The effect of such a partnership is expected to reverberate across the continent, causing marked growth in intra-Africa trade. It is also expected to foster regional integration and help to reduce Africa’s trade finance gap.
All of these are giant strides towards the implementation of the core goals of the African Continental Free Trade Area (AfCFTA).
Signed on the 8th of September 2021, both parties of the agreement will share the default risk on a portfolio of eligible trade deals originated by African Issuing Banks and indemnified by Standard Chartered Bank.
Key recipients of this facility include issuing banks in Africa whose ability to grow their trade finance business has been hindered by inadequate trade confirmation lines from international banks, as well as small and medium enterprises (SMEs) and local corporations that depend on the said issuing banks to meet their trade finance obligations.
Speaking on the agreement, the lender’s Director for Financial Sector Development, Stefan Nalletamby, said: “This partnership is expected to catalyze more than $600 million in value of trade finance transactions across multi-sectors such as agriculture, manufacturing, and energy over the next three years.”
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