AfDB Approves $20 Million Trade Finance Guarantee to Boost Zambia’s SMEs

Access to trade finance remains one of the biggest barriers facing small businesses across Africa, particularly in countries where financial markets remain underdeveloped.

The African Development Bank (AfDB) has approved a $20 million Trade Finance Transaction Guarantee for Access Bank Zambia Limited in a move aimed at expanding access to international trade finance for small and medium enterprises (SMEs) across Zambia.

The facility is expected to unlock up to $240 million in trade activity over the next five years, helping businesses gain greater access to imports, exports, and regional trade opportunities while supporting economic growth and job creation.

The agreement marks the first trade finance partnership between the African Development Bank and Access Bank Zambia and forms part of the Bank's wider Trade Finance Program, which has supported more than $13.8 billion in trade volumes across 129 financial institutions in Africa since 2013.

Addressing Zambia's Trade Finance Gap

Access to trade finance remains one of the biggest barriers facing small businesses across Africa, particularly in countries where financial markets remain underdeveloped.

In Zambia, SMEs account for around 70 percent of the country's gross domestic product and provide approximately 88 percent of employment. Despite their importance to the economy, many small businesses continue struggling to secure affordable financing for imports and exports.

Without access to instruments such as letters of credit, many businesses cannot purchase agricultural equipment, raw materials, consumer goods, or manufacturing inputs from international suppliers.

African Development Bank estimates suggest Africa's overall trade finance gap currently stands at between $100 billion and $120 billion annually, with SMEs disproportionately affected.

The Bank says the new guarantee facility is intended to reduce these financing barriers and improve the participation of Zambian businesses in both regional and global trade networks.

How the Guarantee Will Work

Under the arrangement, the African Development Bank will provide up to 100 per cent risk coverage to international confirming banks on trade finance instruments issued by Access Bank Zambia.

The guarantee effectively reduces the risk faced by foreign financial institutions when supporting transactions originating from Zambia.

This will allow Access Bank Zambia to expand its trade finance services without being constrained by high collateral requirements that have historically limited access for local businesses.

The facility is expected to support imports of:

• Agricultural inputs and machinery

• Manufactured products

• Solar panels and renewable energy equipment

• Consumer goods and industrial materials

It will also help export-oriented businesses secure financing needed to access regional and international markets.

Economic Benefits Expected Across Zambia

Officials say the facility could have broad economic benefits beyond direct financing support.

By improving trade flows and supporting business expansion, the initiative is expected to contribute to:

• Job creation

• Increased household incomes

• Higher government tax revenues

• Stronger private-sector growth

• Improved economic resilience

African Development Bank Country Manager for Zambia, Raubil Olaniyi Durowoju, emphasized the practical impact of trade finance on everyday economic activity.

He said trade finance allows farmers to import certified seeds, manufacturers to source industrial components, and businesses to export finished products into regional markets.

According to Durowoju, the Bank's AAA-rated guarantee is intended to help Zambian businesses participate more competitively in international trade while strengthening the broader economy.

Supporting Women-Led Businesses

The facility also includes an important gender-focused component aimed at improving access to finance for women entrepreneurs.

Women in Zambia are heavily represented in sectors such as:

• Agriculture

• Informal trade

• Small-scale farming

• Agricultural value chains

These are also among the sectors most affected by limited trade finance availability.

To address this challenge, the African Development Bank may provide additional technical assistance through its Affirmative Finance Action for Women in Africa (AFAWA) initiative.

The support is expected to help Access Bank Zambia incorporate stronger gender-sensitive lending practices and allocate part of the guaranteed trade portfolio specifically to women-led enterprises.

Development experts increasingly view financial inclusion for women entrepreneurs as critical for reducing poverty, improving household welfare, and accelerating economic development across Africa.

Boosting Zambia's Regional Trade Participation

The guarantee facility comes at a time when African countries are seeking to expand intra-African trade under the African Continental Free Trade Area (AfCFTA).

Improved access to trade finance is considered essential for enabling businesses to take advantage of new regional trade opportunities created by the agreement.

By reducing financing risks, the facility could help more Zambian companies participate in regional supply chains and cross-border commerce.

Officials believe stronger trade integration could also reduce Zambia's dependence on commodity exports by supporting more diversified economic activity and value-added production.

Signal to Global Financial Markets

Beyond its immediate impact, the African Development Bank says the facility sends a positive signal to international confirming banks and investors about Zambia's trade sector.

The guarantee demonstrates confidence in Zambia-originated trade transactions and could encourage greater participation from global financial institutions.

International trade finance markets often view transactions from developing economies as high-risk, leading to stricter lending conditions and higher costs for local businesses.

The African Development Bank's backing is expected to improve confidence and potentially attract additional financing into Zambia's banking and trade sectors.

Access Bank Zambia Welcomes Partnership

Access Bank Zambia Managing Director Iheanyi Nwogu described trade finance as a core part of the bank's business strategy.

He said the African Development Bank's guarantee would help accelerate growth in the bank's trade finance operations while supporting businesses involved in cross-border trade.

According to Nwogu, the partnership is expected to deepen trade flows and contribute to Zambia's long-term economic development.

Trade Finance Seen as Key Development Tool

Development institutions increasingly view trade finance as a critical mechanism for supporting economic growth in emerging markets.

Limited access to trade finance has long been identified as one of the biggest obstacles preventing African businesses from fully participating in global trade.

By reducing financing barriers, institutions such as the African Development Bank aim to support industrialization, private-sector expansion, regional integration, and job creation across the continent.

As African economies continue working to diversify and strengthen regional trade links, expanded access to trade finance is expected to play an increasingly important role in driving sustainable economic development.