The African Development Bank Group’s Board of Directors has approved a $50 million Risk Participation Agreement (RPA) for the French bank Natixis. As a result of the arrangement, Natixis will be able to assist African banks and their small- and medium-sized company (SME) clients in expanding their regional and global trade. Over the next three years, the agreement is anticipated to contribute to the realisation of a cumulative trade volume of $430 million.
“With this new operation, we are strengthening the trusting relationship between the various players in the African banking system in order to accelerate the development of trade,” said Mohamed El Azizi, DG of the African Development Bank for North Africa. He added: “This is another step towards the realization of the African Continental Free Trade Area which will unleash the full growth potential of the continent and create new opportunities and jobs.”
“This new operation, the second of its kind with Natixis, and with broader geographic coverage, will help catalyze greater intra-African trade flows over the next three years. The ambition is to help more local banks and their SME clients to expand into new African countries, particularly those with low incomes. The aim is to facilitate their access to financing and help them unleash their potential. This is in the service of greater regional integration,” said Stefan Nalletamby, Director of the African Bank’s Financial Sector Development Department.
The risk-sharing agreement aims to satisfy the rising demand for trade finance from African markets in key economic sectors like agribusiness, energy, manufacturing, health, and services. Additionally, it will aid in production diversification, generating jobs and extra tax income for a number of African nations.
This agreement would specifically help African commercial banks and SMEs by ensuring steady access to trade credit, a key factor in regional integration and economic progress.
Due to the COVID-19 pandemic, which has hampered their capacity to get lines of credit from foreign banks, this deal is made at a time when the majority of African banks are undercapitalized. The challenge has been made worse by the tightening of capital and compliance regulations, which has caused foreign banks to scale back their obligations and the number of correspondent banks they have in Africa.
The High 5 strategic targets of the African Development Bank are in line with the Risk Participation Agreement.
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