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High growth, low volumes: Africa’s SCF problem

Access Bank has secured a US$60mn loan facility from British International Investment (BII) to support the provision of trade finance to five import-dependent African markets. 

Nigeria-headquartered Access Bank says the facility is expected to grow African trade volumes by as much as US$90mn, bolstering financing for imports of goods involved in manufacturing, construction and agriculture. 

The lender is targeting companies in DR Congo, Mozambique, Rwanda, Sierra Leone and Zambia, which face long-standing difficulties accessing trade finance as well as unstable currencies, rising interest rates and political uncertainty. 

The loan “facilitates the provision of systemic liquidity during a period characterised by a challenging macroeconomic environment”, it says. 

“Currency instability in Nigeria can hinder the wider proliferation of dollar-denominated trade loans across African markets, constraining countries’ ability to capitalise on opportunities opening up under the African Continental Free Trade [Area] agreement,” Access Bank adds. 

“By specifically targeting import-dependent economies… the improved availability of US dollar-denominated trade loans will ensure availability of key commodities and manufacturing inputs for the production and export of goods.” 

The facility also aims to boost financial inclusion by providing affordable financing to Black African-owned businesses and those that meet Access Bank’s gender commitments. 

Benson Adenuga, BII’s head of office and coverage director for Nigeria, says the agreement “comes at a time when Nigeria’s fragile economic situation needs additional funding, particularly from countercyclical investors like development finance institutions”. 

Admir Imami, director and head of trade and supply chain finance at BII, adds the loan is “a significant step closer to narrowing the trade finance gap in Africa”. 

“Access to finance in fragile states is hugely constrained, often these countries are buffeted by macroeconomic events far beyond their control,” he says. 

The trade finance gap in Africa – measured as the gap between demand and supply for financing facilities across the continent – is believed to total around US$81bn per year, according to African Development Bank estimates. 

UN research published in August found African SMEs are often perceived as high-risk or struggle to provide sufficient credit information, making the cost of financing prohibitively high.