Posted on November, 10, 2023 at 09:10 am
The African Development Bank (AfDB) and Moroccan bank Attijariwafa Bank have agreed to a €100 million risk participation agreement aimed at increasing trade finance availability for local lenders in sub-Saharan Africa.
Under the agreement, Attijariwafa Bank will provide confirmation lines to African lenders who have been affected by the withdrawal of correspondent banking relationships. This will help small and medium-sized enterprises (SMEs) operating in several African countries to access trade finance instruments. This agreement is part of the AfDB’s efforts to increase access to trade finance for SMEs in Africa, which are crucial for the region’s economic development.
According to the bank, there is growing demand for trade finance in key sectors such as agriculture, renewable energy, manufacturing, health, telecommunications, transport, and services. The agreement is the second of its kind between the AfDB and Attijariwafa, following a similar risk-sharing deal signed in 2019. That agreement allowed Attijariwafa to confirm letters of credit issued by African banks, with the AfDB covering up to 50 per cent of the total transaction value.
The partnership comes as trade finance supplies have been declining in Africa. According to the Bank of International Settlements, a focus on regulatory, reputational and financial risks has led to a 29% decrease in correspondent banking relationships over the past decade. This has left local banks struggling to clear funds, access foreign currency, and conduct cross-border payments.
Source: Business.am