The African Development Bank has approved a $300-million support facility for the Eastern and Southern African Trade & Development Bank (TDB).
The COMESA regional trade and project finance package consists of a composite funded trade finance and project finance facility, and an unfunded trade finance risk participation agreement (RPA).
This comes on the heels of the African Continental Free Trade Area (AfCFTA) agreement, which came into force in July 2019; and the Bank’s partnership framework featuring African DFIs, including the TDB, which committed to working together to scale up, speed up, and synergise African development.
The facility’s trade finance component will enhance the TDB’s confirmation capacity, support its rapidly expanding forfeiture business, and help it become a globally acceptable confirming bank. The project finance component will facilitate the delivery of export-oriented infrastructure, which will promote regional trade within the COMESA region.
In presenting the project to the board, the bank’s director for financial sector development, Stefan Nalletamby, said that the RPA “will enable the bank and the TDB to share confirmation risk on African issuing banks.
“This will promote broad-based economic growth on the African continent by making international trade easier,” he said. “It will benefit no less than 43 financial institutions operating in over 15 regional member countries, catalysing up to $2 billion worth of trade over the three-year period.”
The financing will also scale up intra-African trade, and foster regional integration. The trade finance funding will boost the import-export trade activities of local corporates and SMEs, while the project finance component will support regional infrastructure development, all crucial for the attainment of the Bank’s strategic objectives under the High 5s.