AfDB Presents Initiative on Trade Finance
The African Development Bank (AfDB) Group on Tuesday, April 14, 2009, unveiled its trade finance initiative. In a conference jointly hosted by the AfDB and the International Finance Corporation (IFC), the AfDB brought together like-minded partners to help them gain a better understanding of the effects of the global financial crisis on the continent’s private sector and to come up with a common approach to address the adverse consequences on the continent.
The event, which was opened by Bank Group President, Donald Kaberuka, and attended by banking and trade financing experts from across the globe, served as a platform for the exchange of perspectives on how to finance trade in a context of a global financial crisis with a view to reducing the crisis’ impact on the continent.
The AfDB board of directors has approved a US$ 1 billion Trade Finance Initiative, US$ 500 million of which will be used as a first tranche to boost trade finance through ongoing and new trade lines of credit operations with several African banks.
One of the first consequences of the global financial crisis has been the apparent drying up of liquidity in international markets which has, in turn, impacted adversely on the ability of banks to offer, among other things, trade financing in emerging markets due to reduced appetite for risk and tighter liquidity management. Africa is not immune to such trends and as the crisis deepens, the ability to meet historical demand for trade finance is becoming increasingly challenging. At the same time, the cost to the global economy of failing to support trade finance in general – particularly short-term trade finance – could have drastic implications for exporters and importers around the world, mostly in Africa.
The AfDB has recently formulated a comprehensive crisis response strategy, including a trade finance initiative to support trade flows and the provision of trade finance. The AfDB is also looking to collaborate on this front with other International Financial Institutions in order to join forces with a view to maximizing impact at a time when joint action towards leveraging the impact is vital, especially given the severity of the crisis.