AfDB supports efforts in improving trade finance in Africa
The African Development Bank (AfDB) is supporting efforts to improve trade financing on the continent. The Bank is not only financing trade activities and projects to facilitate trade, it is also conducting studies to unravel the challenges to trade and to provide solutions.
During a presentation at the session on “Trade Finance in Africa – What next?” at the ongoing 50th Annual Meetings of the AfDB in Abidjan, Côte d’Ivoire, Wednesday, May 27, Issa Faye, Division Manager of the Bank’s Research Department, presented findings of the Bank on trade which indicates that to date, the AfDB has provided financing to the tune of $10 billion to facility trade on the continent.
He said during the study, the Bank contacted 900 commercial banks in one year, and 275 in 25 countries responded.
The study identified the funding gap in trade in Africa, which is measured in billions of dollars – indicating that around a third of African countries have interest rates in excess of 10 percent on trade loans offered on a non-sovereign basis and cash collateral requirements of up to 50 percent of the value of loans.
Towards the goal of enhancing trade on the continent, the AfDB is also building the capacity of local banks and providing financing to them, Faye said.
In his remarks, Jean Louis Billon, the Minister of Trade for Côte d’Ivoire, said the rest of the world is interested in Africa because of the continent’s growth and said that interest should be seen as good fortune and not a risk. According to him, Africa must transform that growth into inclusive growth because the continent has diversified drivers for growth.
Acknowledging that Africa has infrastructure and energy deficits that are hindering growth, he said to fan growth there is the need to invest in in building dams, roads and provide electricity.
“To succeed, we have to also be a continent that in addition to production, also processes,” he said, and called on Africa to have a voice in international trade, something he said shouldn’t necessarily be protectionism.
Benedict Oramah, Vice-President of Afreximbank, said between the year 2000 and 2013, import financing on the continent has increased and Afreximbank has provided about $40 billion to close the funding gap in import financing.
He also shared the bank’s experience in trade financing when he gave the example of how the bank financed the establishment of a cocoa processing plant in Côte d’Ivoire.
Sebastain Ashing-Katai of Ecobank pointed out that part of the challenges to trade finance is lack of information, he however said Ecobank is working on addressing that issue.
Among the panelists was Mustapha Sow of the United Nations Economic Commission for Africa (ECA) and Florian Witt, Managing Director, Head of Africa Commerzbank.