AfDB ap­proves USD$250m risk par­tic­i­pa­tion agree­ment with ABSA

Zambian Business Times - - BUSINESS REVIEW -

The African De­vel­op­ment Bank (AfDB), last week, ap­proved an un­funded USD$250-mil­lion risk par­tic­i­pa­tion agree­ment (RPA) with ABSA Bank. This RPA, housed within the AfDB’ s Trade Fi­nance op­er­a­tions, will en­hance African is­su­ing banks’ abil­ity to lever­age trade fi­nanc­ing through a multi sec­to­rial ap­proach.

When fully used, fore­cast es­ti­mates in­di­cate that the fa­cil­ity will catal­yse roughly over $2-bil­lion worth of trade in three years.

The fa­cil­ity’s align­ment to ad­dress the acute mar­ket de­mand for trade fi­nance in Africa through agri­cul­ture, trans­port and man­u­fac­tur­ing is con­sis­tent with the AfDB’ s goals of en­sur­ing that Africa in­dus­tri­alises and trades more.

By ex­ten­sion, this RPA will also fos­ter fi­nan­cial sec­tor de­vel­op­ment and re­gional in­te­gra­tion, the AfDB said in a state­ment.

Pre­sent­ing the project to the AfDB board, fi­nan­cial sec­tor de­vel­op­ment di­rec­tor Ste­fan Nal­letamby made a ro­bust case for how, through strate­gic part­ners like ABSA, the AfDB’s RPA in­stru­ment con­tin­ues to fa­cil­i­tate trade on the con­ti­nent; thereby help­ing to re­duce Africa’s trade fi­nanc­ing gap.

“This fa­cil­ity, through a 50:50 risk shar­ing ap­proach, will help to pro­mote broad-based eco­nomic growth on the African con­ti­nent through in­creased fa­cil­i­ta­tion of im­port-ex­port ac­tiv­i­ties of African cor­po­rates and small- and medium-sized en­ter­prises, and in­crease in­tra-Africa trade and re­gional fi­nan­cial in­te­gra­tion in line with the AfDB’s Hi5 strate­gic ob­jec­tives,” he said.

Un­der the RPA, the AfDB and ABSA will share the de­fault risk on a port­fo­lio of el­i­gi­ble trade trans­ac­tions orig­i­nated by African is­su­ing banks and in­dem­ni­fied by ABSA.

The AfDB’s com­mit­ment un­der the RPA is to as­sume up to 50% of ev­ery un­der­ly­ing trans­ac­tion is­sued by the said African is­su­ing banks, while ABSA will con­firm such a trans­ac­tion and bear not less than 50% of its un­der­ly­ing risk.

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