African Development Bank Approves US$75 million to enhance Trade Financing on the African continent
The Board of Directors of the African Development Bank Group on Wednesday, 12 October approved an unfunded $75 million trade finance Risk Participation Agreement facility for FirstRand Bank Limited (FRB).
The approved facility will enhance FRB’s ability to underwrite trade finance transactions originating from issuing banks in several countries, including transition states and low-income countries across Africa.
It is estimated that when fully utilized, this RPA facility, will support approximately $500-600 million of trade over the next 3 years, of which more than $100 million will support intra-African trade and exports. The facility will support sectors like agriculture, manufacturing, energy and retail trade, which is consistent with the African Development Bank Group’s goals of ensuring that Africa industrializes, is able to feed herself, and the living standards of its people are significantly improved. The facility is also an enabler to achieving the UN Sustainable Development Goals.
In presenting the project to the Board, the Bank’s Financial Sector Development Director, Stefan Nalletamby, said, “This facility, premised on a strategic credit-risk sharing mechanism, will help to promote inclusive economic growth in Africa’s low-income countries through increased facilitation of multi-sectoral import-export activities of local corporates and SMEs. It will also increase intra-Africa trade and regional financial integration in line with the Bank’s Hi5 strategic objectives.”
About the RPA: The structure of this unfunded $75 million RPA with FirstRand Bank makes the African Development Bank responsible for underwriting up to 75% credit risk cover for eligible transactions stemming from issuing banks in Africa’s transition states and low-income countries. It also provides for up to 50% credit risk cover for eligible transactions originating from issuing banks from other African countries not classified as low income.
About First Rand Bank (FRB): Listed on the Johannesburg Stock Exchange (JSE) and the Namibian Stock Exchange (NSX), FirstRand Limited is the largest financial institution by market capitalization in Africa. Through its portfolio of integrated financial services businesses, FRB operates in South Africa, several markets in sub-Saharan Africa, the UK, and India. It continues to use its strong balance sheet to support businesses in key markets across Africa especially post the COVID-19.