By Favour Nnabugwu
The Board of Directors of the African Development Bank Group, AfDF, has approved a Risk Participation Agreement of $50 million with Crédit Agricole Corporate and Investment Bank.
The deal will enable African banks and their small and medium-sized enterprise (SME) clients to participate more in regional and international trade. It aims to support a cumulative trade transaction volume of $450 million over the next three years.
“This agreement strengthens confidence among various African actors to encourage a new trade dynamic on the continent,” said Mohamed El Azizi, the African Development Bank’s Director General for North Africa. “And this is crucial for the realization of the African Continental Free Trade Area, which will help to build resilience, generate growth and promote a recovery that creates opportunities and jobs.”
Stefan Nalletamby, the Bank’s Director for Financial Sector Development, said: “This partnership will enable Crédit Agricole CIB, an institution that is renowned for its commitment to Africa, to do more trade finance by further supporting local banks. When fully up and running, the partnership could support some 50 local issuing banks and their business clients across different African countries. It should act as a catalyst for major trade flows over the next three years.
The Risk Participation Agreement aims to meet the growing demand in African markets for trade finance in vital economic sectors, such as agri-food, energy, manufacturing, healthcare, and services. It will also encourage productive diversification in several African economies, creating more jobs and tax revenues.
By guaranteeing commercial banks and African SMEs’ access to trade finance, the agreement will stimulate economic growth and regional integration.
Currently, most African banks are poorly capitalized – a situation aggravated by the adverse knock-on effects of the Covid-19 pandemic – which limits their ability to access lines of credit from international banks. This difficulty has been worsened by the tightening of equity capital and conformity-related regulatory requirements, which has led international banks to reduce their commitments and the size of correspondents in Africa.
The approval of the Risk Participation Agreement aligns with the African Development Bank’s High 5 strategic vision to establish the conditions necessary for strong, sustainable and inclusive growth on the continent.
Crédit Agricole CIB is the Corporate and Investment Banking arm of Crédit Agricole, the world’s 10th-largest bank by balance sheet size in 2021 (The Banker, July 2022). It offers its corporate and institutional clients a broad range of services in capital markets, investment banking, structured financing, commercial banking and international trade
The Bank is a pioneer and leader in climate finance, with a comprehensive range of solutions for its clients. More than 8,900 employees in Europe, the Americas, Asia-Pacific, the Middle East and Africa support the Bank’s customers, meeting their financial needs worldwide