The International Finance Corporation (IFC) and BMCE Bank International UK have struck a risk-sharing agreement to bolster trade finance support for African businesses still reeling from the Covid-19 pandemic.
The new facility aims to help BMCE scale up its trade finance support for African importers and exporters, by covering 50% of losses on eligible loans made by the regional lender.
Covering a total portfolio of US$150mn, IFC will contribute as much as US$75mn through its global trade liquidity programme (GTLP), which is available to financial institutions in developing markets.
In Africa, IFC says the GTLP serves financial institutions in 20 countries, including six fragile or conflict-affected states.
Its support is underpinned by the International Development Association’s private sector window blended finance facility, which provides first-loss guarantees in low-income countries.
Headquartered in London and Paris, BMCE offers a range of trade finance solutions to exporters and importers in 18 countries on the continent, and acts as a subsidiary of the Bank of Africa in Morocco.
“Origination and distribution are key to our business model, and thanks to privileged partners like IFC we will be serving our international and African customers by bridging the trade finance gap between Europe and Africa with a sustainable finance impact,” says Houssam El Hak Morssi Barakat, CEO of BMCE International UK.
The IFC has ramped up its support on the continent in the past year, as the World Bank Group member works to help African economies battle the effects of the Covid-19 pandemic.
Africa was rocked by its first recession in more than two decades last year, with the African Development Bank estimating that real GDP contracted by 2.1% across the continent in 2020.
Figures from the World Trade Organization further highlight how merchandise imports plunged by nearly 9% across Sub-Saharan Africa last year.
Amid concerns that trade flows of essential goods such as food and medical equipment could be hampered, the IFC and the Multilateral Investment Guarantee Agency (Miga) announced in July that they would launch a new trade finance initiative backing critical trade flows in vulnerable regions, including Africa.
That particular partnership was created under the IFC’s global trade finance programme (GTFP) – a separate facility from the GTLP used in the recent BMCE deal – to offer targeted support to transactions intermediated by state-owned banks.
Makiko Toyoda, head of the GTFP, told GTR that the new programme would be a “game changer for some of the new countries that we are trying to enter, such as Rwanda and Mali”.