African Development Bank supports Sumitomo in Africa
Staff writer ▼ | November 19, 2015
African Development Bank (AfDB) in Abidjan, approved an unfunded $100-million Risk Participation Agreement (RPA) for Sumitomo Mitsui Banking Corporation Europe (SMBCE) to support issuing banks in Africa expand their trade finance operations.Article continues below
The facility will help address critical market demand for trade finance on the continent by providing support for trade in vital economic sectors such as agriculture and manufacturing.
It will also foster financial sector development and regional integration, and contribute to government revenue generation.
Most African banks are small and therefore find it difficult to obtain adequate trade finance facilities from international confirming banks to support African importers and exporters.
AfDB’s additionality lies in the use of its AfDB credit rating to give greater comfort to SMBCE to take more risk on local banks in Africa and provide them increased trade finance facilities.
The RPA facility is expected to run over three years, as a 50/50 risk sharing arrangement where SMBCE will match AfDB’s undertaking in each transaction, and will create a maximum trade finance portfolio of up to $200 million at any one time.
Counting rollovers, it is expected that the facility will support more than $1.2 billion of trade in Africa over the 3-year tenor.
This will be the AfDB’s first RPA with a major Japanese financial institution, which in itself is a strategic milestone in the history of the Trade Finance Programme.
SMBCE is a major player in the global trade finance market with significant presence in many emerging markets and is well positioned to support South-South trade involving Africa. ■ What to read next
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