The International Islamic Trade Finance Corporation (ITFC) has committed to a credit facility agreement worth US$100mn with the African Export-Import Bank (Afreximbank).
Afreximbank’s president Benedict Oramah and ITFC CEO Hani Sombol signed off on the deal at the Investment in Africa forum in Egypt over the weekend.
It is hoped that the facility, which is part of the Africa Trade and Investment Promotion Programme, will increase trade between Arab and African countries by financing and derisking trade flows between the regions. It’s also looking to leverage other Arabian funds in support of Arab investments in Africa.
This is the second major deal between Afreximbank and the ITFC this year, after the two penned the Arab-Africa Trade Finance and Promotion Programme (AATFPP) in April. Worth US$500mn, it agrees to provide financing facilities, integrated trade solutions to support SMEs, joint capacity building programmes, market access support and technical co-operation.
Oramah has previously spoken to GTR about the issues the continent faces when it comes to financing trade: “The trade finance gap in Africa is estimated at US$120bn, but I personally think it’s as much as US$200bn.”
“We know what the international commercial banks are doing. Instead of using the “d” word [derisking], we can say that they are going away. The compliance cost is high. Africa is fragmented – it has 55 countries: for these banks it’s not interesting, it doesn’t make sense for them.”
The ITFC is another source of funds though, which, since its inception in 2008, has provided more than US$45bn of trade financing to the 56 member countries of the Organisation of Islamic Cooperation (OIC) member countries, 27 of which are in Africa.
The ITFC has been looking to boost trade in Africa outside of its partnership with Afreximbank too, and is broadly committed to financing SMEs through local banks and the implementation of capacity-building programmes
As an example, earlier this year it signed an agreement worth as much as US$300mn with Mali, with the ITFC saying it would mobilise financing from international and regional financial institutions for imports of energy products, agricultural inputs and foodstuff, and exports of agricultural commodities.
In April the Islamic body also inked a five-year framework agreement with Niger worth US$80mn. It’s aiming to bolster trade with other OIC countries by providing export finance for agricultural and livestock commodities, as well as funds for a new food security programme and a new operation with the Nigerien national power company for the import of electricity and petroleum products.