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The African Development Bank (AfDB) and Attijariwafa Bank have agreed a €100mn risk participation agreement aimed at boosting trade finance availability for local issuing lenders across Sub-Saharan Africa.

Under the deal, Attijariwafa Bank will extend confirmation lines to African lenders whose trade finance activity has been constrained by international financial institutions cutting correspondent banking relationships, the AfDB says.

The deal will help SMEs operating in several African countries gain access to trade finance instruments, it adds.

The bank notes there is “growing demand” for trade finance in several key economic sectors such as agriculture, renewable energy, manufacturing, health, telecommunications, as well as transport and services.

The agreement, the second of its kind between the AfDB and Attijariwafa, follows a similar risk sharing deal signed in 2019. Under the previous unfunded €10mn risk sharing scheme, Attijariwafa confirmed letters of credit issued by local African banks with the AfDB covering up to a maximum of 50% of the total transaction values.

The partnership comes amid growing concern over dwindling trade finance supplies on the continent. According to the Bank of International Settlements, a heightened focus by banks on regulatory, reputational and financial risks has led to a 29% decline in correspondent banking relationships over the last decade, leaving local banks struggling to clear funds, access foreign currency and conduct cross-border payments.

This de-risking is also a contributory factor to the global gap between trade finance supply and demand, which is estimated by the Asian Development Bank to have grown to US$2.5tn, a jump of more than 50% since 2021.

During a summit last month in Morocco, the head of the World Trade Organization (WTO), Ngozi Okonjo-Iweala, called on multilateral development banks to grow their trade finance business in low-income regions.

This was followed by the publication by the Bankers Association for Finance and Trade of an updated version of its guidelines for respondent banks, to help them maintain their correspondent banking relationships amid an increasingly complex regulatory environment.