Citi has signed a risk-sharing deal with British International Investment (BII), the UK’s development finance institution, as part of plans to increase its supply chain finance volumes in Africa.

The US$100mn master guarantee facility will see BII – which was formerly known as the CDC Group before a rebrand this year – act as a guarantor for supply chain finance facilities provided by Citi to SME suppliers and underserved segments, with the bank saying that it will be able to increase its annual SCF volumes in the continent by up to US$400mn as a result.

BII and Citi have agreed to set impact criteria to ensure that flexible capital is being directed toward underserved groups, women-owned businesses and enterprises targeted by the South African government’s Broad-based Black Economic Empowerment programme, which encourages businesses to integrate black people in the workplace, support black businesses, and give back to black communities affected by land repossession.

“We are delighted to come together with BII to support the growth of supplier financing in Sub-Saharan Africa,” says Chris Cox, global head of trade and working capital solutions, treasury and trade solutions, at Citi. “This agreement will enable us to expand our supply chain finance offering and increase credit to suppliers most in need, in particular the SMEs that normally have limited access to financing.”

The deal comes as rejection rates for trade finance applications for SMEs in Africa are rising, with bank participation in activities decreasing. According to a study carried out in 2020 by the African Development Bank and the African Export-Import Bank, the continent’s trade finance gap reached more than US$81bn before the emergence of Covid-19, and the pandemic-induced economic downturn and capital flight has further reduced the amount of trade finance available to businesses in the continent, particularly SMEs.

This transaction is the latest outing for BII’s trade and supply chain finance programme, which has so far supported US$20.9bn of trade across Africa and South Asia through partnerships with regional, international financial intermediaries.