AfDB approves a €40-million Risk Participation Agreement with BNP Paribas to Boost Trade Finance in Africa
The Board of Directors of the African Development Bank (AfDB) approved on Wednesday, April 30 in Tunis an unfunded €40-million Risk Participation Agreement (RPA) with BNP Paribas to support the trade finance activities of African issuing banks. The facility will help address critical market demand for trade finance in Africa by supporting trade in vital economic sectors such as agribusiness and manufacturing. Moreover, it will foster financial sector development and regional integration, and contribute to government revenue generation.
The majority of African banks have weak capital bases which constrain their ability to obtain adequate trade limits from international confirming banks and to undertake sizeable transactions that could have substantial development impact. AfDB’s additionality lies in the use of its “AAA” rating to share trade risk with BNP Paribas and enhance the trade finance capacity of African banks and financial institutions, thereby expanding trade and strengthening regional integration. Further, BNPP has more than 100 years of experience in trade, over 200 correspondent banking relationships, 9 subsidiaries, 3 branches and deal footprint in more than 20 non-presence countries in Africa.
Through a 50-50 risk-sharing structure, the RPA will broaden the availability of trade finance across Africa over a three-year period by targeting SMEs and indigenous firms. BNP Paribas will match AfDB’s undertaking in every transaction, thereby creating a portfolio of up to €80 million. Including rollovers, this facility is expected to facilitate approximately €500 million of trade in intermediate and finished goods, raw materials and equipment to support the continent’s economic growth.
BNP Paribas has a presence in 75 countries with more than 180,000 employees, including more than 140,000 in Europe. It ranks highly in its three core activities: Retail Banking, Investment Solutions and Corporate and Investment Banking. In Europe, the Group has four domestic markets (Belgium, France, Italy and Luxembourg) and BNP Paribas Personal Finance is the leader in consumer lending. BNP Paribas is rolling out its integrated retail banking model across Mediterranean basin countries, in Turkey, in Eastern Europe and a large network in the western part of the United States. In its Corporate and Investment Banking and Investment Solutions activities, BNP Paribas also enjoys top positions in Europe, a strong presence in the Americas and solid and fast-growing businesses in Asia-Pacific.