Africa Investment Forum 2019: African
Development Bank signs $250-million risk participation agreement with ABSA, to
address Africa’s trade financing gap.The Bank’s trade finance operations aim to
facilitate inter and intra Africa trade by reducing the trade financing gap on the
continent JOHANNESBURG, South Africa, November 18, 2019/ — The African Development
Bank (https://AfDB.org/en) has signed an unfunded $250-million Risk Participation
Agreement (RPA) facility with ABSA – a pan-Africa financial institution with a solid
presence in 12 African countries.
The 3-year RPA facility was signed November 12, on the sidelines of the Africa
Investment Form through its trade finance operations. Under this 3-year RPA
facility, the Bank and ABSA will share default risk on a portfolio of eligible trade
transactions originated by African Issuing Banks (IBs) and confirmed by ABSA.
Leveraging the Bank’s AAA rating, ABSA will underwrite trade transactions issued by
African issuing banks across key sectors like agriculture, energy, and
light-manufacturing with a special focus on Small and Medium Sized Enterprises
(SME’s) in fragile and low-income African countries. The Bank’s commitment under
the RPA is to assume up to 50% (and 75% in special cases) of every underlying
transaction issued by the IBs, while ABSA will confirm such a transaction and bear
not less than 50% of its underlying risk.
Working with strategic partners like ABSA, the Bank’s trade finance operations aim
to facilitate inter and intra Africa trade by reducing the trade financing gap on
the continent. Since 2013, the Bank’s RPA program has supported over 16 issuing
banks with about US$650 million limits in Southern Africa alone, with special focus
on SMEs and local corporates in manufacturing, agribusiness, import/export and
energy sectors.
In the same period, the program supported over $4billion in trade volumes across
Africa, with $938 million of that being intra-Africa trade. Other trade finance
instruments employed by the Bank include: (i) Trade Finance Line of Credit (TFLoC)
(https://bit.ly/2CRVxcv) – funded line provided to banks for the financing of
exclusively trade-related transactions in Africa; and (ii) Soft Commodity Finance
Facility (SCFF) (https://bit.ly/2CRVxcv) – funded instrument meant to support the
financing of exports of soft commodities across the continent.
“The RPA facility is one of the tools employed by the African Development 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,” said Pierre Guislain, Bank Vice President for Infrastructure,
Private Sector and Industrialization, “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,” he added.
