The African Development Bank Group (AfDB) has approved a US$10mn trade finance transaction guarantee for Exim Bank Tanzania to support trade deals.
The move will “unlock and de-risk” trade finance lines for the commercial bank, the AfDB says, while expanding access to essential imports and bolstering Tanzania’s private sector.
The facility will provide up to 100% guarantees to international confirming banks against risks of non-payment, and is expected to support up to US$60mn in trade transactions over three years.
This will help Exim Bank Tanzania “reduce its dependence on scarce foreign exchange collateral required by international banks, thus freeing resources for more productive lending to local businesses active in intra-African and international trade”, according to the AfDB.
Key sectors such as agriculture, health, energy and manufacturing will benefit by supporting the imports of essential goods, such as fertiliser, pharmaceuticals and farming equipment, as well as the export of Tanzanian commodities like coffee, cashew and cotton.
The facility – which will be implemented through agreements with Exim Bank Tanzania and participating confirming banks – will be particularly vital for small and medium-sized enterprises (SMEs), who make up over 90% of Tanzanian businesses and account for a third of GDP.
However, a “US$1.3bn annual trade finance gap limits progress and continues to hold them back”, AfDB’s statement notes.
“SMEs and corporates are vital engines of industrialisation, innovation and job creation, and this facility will remove barriers to cross-border trade while opening doors for new partnerships with global and regional financial institutions,” says Exim Bank Tanzania’s CEO, Jaffari Matundu.
The announcement aligns with the AfDB’s 2024-2033 ‘Ten-Year Strategy’, as well as the 2021-2025 Tanzania country strategy paper, both of which prioritise improved private sector access to finance.
“Trade finance is essential for Africa’s economic development, facilitating both domestic and international trade, boosting economic growth and promoting regional integration,” adds Lamin Drammeh, AfDB’s head of trade finance.
“This partnership with Exim Bank Tanzania demonstrates the African Development Bank Group’s commitment to reducing Tanzania’s trade finance gap, empowering local businesses to compete globally and create more jobs across the country.”
Earlier this year, AfDB also issued a US$7.5mn guarantee to The Bank of Africa Tanzania support the provision of trade finance to local corporates and SME importers.
