AfDB and TDB Group Partner for $150M Trade Finance Facility to Boost Intra-Africa Trade

New Agreement to Support $1.8 Billion of Trade Over Three Years, Strengthening Regional Integration and Economic Growth.

At the Africa Investment Forum 2024 in Rabat, Morocco, the African Development Bank Group (AfDB) and the Eastern and Southern African Trade and Development Bank (TDB Group) signed a landmark agreement for a $150 million Trade Finance Unfunded Risk Participation Agreement (RPA) facility. This partnership aims to support intra-Africa trade, enhance regional integration, and address the growing trade finance gap on the continent.

The RPA facility will provide crucial guarantee cover of up to 50% for trade finance transactions, with an even higher guarantee of up to 75% for transactions involving Low-Income Countries (LICs) and transition states. This initiative is expected to facilitate around $1.8 billion in trade transactions over the next three years, contributing to the growth of cross-border trade within Africa.

Facilitating Trade and Economic Integration

The TDB Group, a leading regional development finance institution, is renowned for offering tailored trade finance solutions across Africa, including import and export financing, structured commodity finance, pre- and post-shipment finance, issuing letters of credit (LCs), guarantees and bonds, and working capital solutions aimed at suppliers. The RPA facility will be accessible to local and regional issuing banks in TDB Group’s member states, with a particular focus on supporting African SMEs, who depend on these banks to meet their trade finance needs.

“TDB Group is thrilled to deepen our partnership with the African Development Bank Group through this tailored risk-sharing facility,” said Wegoki Mugeni, Chief Operating Officer of TDB Group. “This critical support will address the significant trade finance gaps that continue to affect Africa, especially as international banks scale back their activities on the continent.”

A Collaborative Approach to Bridging the Trade Finance Gap

According to Attout Ahmed, Director of the Financial Sector Development Department at AfDB, this collaboration reflects a shared commitment to advancing trade in Africa: “Supporting trade is a key priority for the African Development Bank, as trade finance is a key driver of economic growth. This partnership with TDB Group strengthens our efforts to improve access to trade finance, particularly in emerging markets where it is essential for boosting cross-border trade.”

Strengthening Strategic Priorities for Africa’s Growth

This partnership is aligned with the AfDB’s Ten-Year Strategy, which emphasizes trade promotion and economic growth, and is closely linked to three of the AfDB’s High-5 strategic priorities: Feed Africa, Industrialize Africa, and Integrate Africa. These priorities reflect the critical role that trade, especially in sectors such as agriculture, energy, manufacturing, and infrastructure, plays in driving Africa’s sustainable development.

The facility will also support key sectors like agriculture, infrastructure, energy, and manufacturing, areas that are pivotal for driving economic transformation and regional integration in Africa. By facilitating easier access to trade finance, the partnership aims to empower African SMEs and businesses, boosting their competitiveness and fostering economic resilience across the continent.

This $150 million trade finance facility represents a significant step towards filling the gap in Africa’s trade finance ecosystem, especially as global financial institutions pull back from the continent. It underscores the importance of leveraging partnerships between multilateral development banks and regional financial institutions to unlock private sector financing and create a more inclusive, sustainable economy across Africa.