AfDB approves $50 million deal with U.B.A.F.
The facility will help address critical shortfall in commercial financing for trade in Africa and is expected to benefit such vital economic sectors such as agribusiness and light manufacturing.
It will also facilitate access to intermediate goods to help Regional Member Countries move up the value chain. Moreover, it will foster financial sector development, regional integration and contribute to generation of government revenue in various countries.
Most African banks lack scale and have capital bases that tend to restrict their ability to obtain adequate trade credit from international banks and inhibit their capacity to originate large ticket transactions that would typically have substantial development impact.
U.B.A.F. is a dedicated trade finance bank with more than 40 years' experience and a wide network covering 18 African countries through 187 banking relationships. The AfDB's added value lies in the use of its "AAA" rating to share risk with U.B.A.F. to help enhance the trade finance capacity of African banks and financial institutions, thereby expanding trade and strengthening regional integration.
The RPA is a 50-50 risk-sharing structure which is aimed at broadening the availability of trade finance across Africa over a three-year period by targeting SMEs and indigenous firms. U.B.A.F. and AfDB will both provide an undertaking of $50 million, thereby creating a portfolio of up to US $100 million.
Including roll-overs, this facility is expected to facilitate approximately $600 million of trade in intermediate and finished goods, raw materials and equipment to support the continent's economic growth. ■