AfDB inks $250mn RPA with ABSA to focus on reducing Africa’s trade financial gap

The African Development Bank has finalized an unfunded USD 250 million Risk Participation Agreement (RPA) facility with ABSA.

ABSA is a pan-Africa financial institution with a solid presence in 12 African nations. The three-year RPA facility was signed between the African Development Bank and ABSA on the sidelines of the Africa Investment Forum 2019 through its trade finance operations. Both the institutions will share default risk on a portfolio of eligible trade transactions originated by African Issuing Banks (IBs) and confirmed by ABSA.

ABSA will underwrite trade transactions issued by African issuing banks across key sectors like agriculture, energy, and light-manufacturing with a special focus on Small and Medium Sized Enterprises in fragile and low-income African countries. The Bank's commitment under the RPA is to assume up to 50 percent (and 75 percent in special cases) of every underlying transaction issued by the IBs, while ABSA will confirm such a transaction and bear not less than 50 percent of its underlying risk.

"The RPA facility is one of the tools employed by the African Development Bank to alleviate poverty and achieve robust economic growth and sustainable development on the continent through: increased trade facilitation of import-export activities of African local corporates and SME's; enhanced inter and intra-Africa trade; and regional integration. This is consistent with the Bank's High 5s focus to Industrialize Africa, Light up Africa, Integrate Africa, Feed Africa and improve the living standards of Africans," Pierre Guislain, Bank Vice President for Infrastructure, Private Sector and Industrialization opined.

With this association with ABSA, the African Development Bank (AfDB) intends its trade finance operations to facilitate inter and intra Africa trade by reducing the trade-financing gap on the continent. The Bank's RPA program has already provided support to more than 16 issuing banks since 2013 with about US$650 million limits in Southern Africa alone, with special focus on SMEs and local corporates in manufacturing, agribusiness, import/export and energy sectors.