African Development Bank Greenlights $150 Million Regional Trade Finance Unfunded Risk Participation Agreement Facility for Eastern and Southern African Trade & Development Bank (TDB)

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The Board of Directors of the African Development Bank Group has approved a $150 million Trade Finance Unfunded Risk Participation Agreement facility between the African Development Bank and Trade & Development Bank (TDB). The agreement aims to boost intra-Africa trade, promote regional integration, and contribute to reducing the trade finance gap in Africa, aligning with the goals of the African Continental Free Trade Area (AfCFTA).

Under the agreement, the African Development Bank will provide guarantee cover of 50% and up to 75% for transactions in low-income countries and transition states on a risk-share basis with TDB to qualifying local and regional banks in the Common Market for Eastern and Southern Africa (COMESA) region. These banks are active in the trade finance sector. The facility is expected to support approximately $1.8 billion of trade over the next three years.

Nwabufo Nnenna, the group’s Director General for the Eastern Africa region, emphasized the importance of supporting trade in Africa, stating that trade finance is a vital driver of economic growth, particularly in emerging markets. Admassu Tadesse, TDB Group President and Managing Director, expressed satisfaction with the strategic partnership with the AfDB Group, aiming to scale up trade finance and other offerings in a region where there are significant gaps in access to trade finance.

The Unfunded Risk Participation Agreement (RPA) is one of the trade finance instruments offered by the African Development Bank to support local banks in Africa. It provides partial risk cover for trade finance operations, with the African Development Bank typically taking a 50% share of the risk. The Bank selects commercial partners based on criteria such as the size of their African portfolio, market coverage, support for intra-African trade, and the quality of credit approval processes.

In addition to the Unfunded RPA, the African Development Bank also offers a 3-year trade finance Transaction Guarantee (TG) Facility to local banks to support the confirmation of their trade finance transactions.