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Ghana International Bank (GHIB) and the UK’s development finance institution have launched a US$50mn facility aimed at reducing the trade finance gap in several African markets.  

As part of a mutual risk participation agreement, GHIB and British International Investment (BII) will share risk on trade finance flows in Sierra Leone, Liberia, The Gambia, Benin, DRC, Rwanda and Tanzania. 

A GHIB spokesperson tells GTR that the primary focus will be on letters of credit, avalised bills and the refinancing of existing lines. The three-year facility also includes options to renew. 

The deal is set to boost GHIB’s capacity in markets acutely affected by Africa’s trade finance gap – the difference between supply and demand – which was pegged at around US$81bn in a 2019 study.

However, this figure is likely higher, as the estimated global shortfall has since risen from US$1.5tn to US$2.5tn.   

Poor borrower credit ratings, shrivelling correspondent banking lines from international lenders and difficulties conducting know-your-customer checks are all blamed for the deficit of trade finance in the region. However, African banking specialists often claim that the perceived credit risks do not match reality.   

“Africa’s trade financing gap is one of the continent’s most pressing challenges and access to this funding will enable local businesses to trade more with the world, including the UK,” says UK parliamentary under-secretary for Africa Lord Collins. 

GHIB’s chief executive officer Dean Adansi says the agreement pairs the UK-headquartered bank’s trade finance network and deep understanding of local risk with BII’s “superior scale and capacity”.  

“We will work to make this deal a success, as it will open the way for more liquidity injections into the market,” he says.  

“We’ve been around for 65 years. We know how to do trade finance,” Adansi told GTR last year. “We have the people, we have the systems, we have the controls, and we think we’re in a very good place to capitalise on that substantial market opportunity.” 

GHIB primarily serves Ghana – its major shareholder is the country’s central bank – and other Anglophone nations in West Africa, but is eyeing expansion into East African markets such as Kenya, as well as Switzerland, home to key buyers of African commodities.   

“We’re working to become a more pan-African institution… and therefore the financing requirements are going to be significantly higher,” Adansi said, adding that the lender can be a strong partner for global multilateral banks and development finance institutions. 

GHIB posted a pre-tax profit of £4.3mn in 2023, recovering from a £10.1mn loss in 2022. In the last five years, the bank handled US$6bn in documentary trade collections and US$1.3bn in trade finance transactions in Sub-Saharan Africa, according to a presentation given at a London conference held by the lender last year.  

It also concluded US$600mn in secondary market deals over the period.   

In the past year, BII has signed several agreements with banks active in Sub-Saharan Africa including a US$50mn risk-sharing deal with Mashreq, a US$150mn facility for Absa Bank and a US$10mn loan to NMB Bank Zimbabwe.  

“Trade remains a key driver of growth for African economies especially in frontier markets like Sierra Leone, Liberia and The Gambia,” says Kwabena Asante-Poku, BII’s Ghana country director.  

“Enhancing the flow of trade credit and financial intermediation to these markets will ensure access to essential goods and services which in turn drives sustainable and inclusive economic growth.”