Rwanda has become the first nation to sign up to the African Export-Import Bank’s (Afreximbank’s) new Fund for Export Development in Africa (FEDA), which will soon set up headquarters in the country’s capital.

At a ceremony over the weekend, the Rwandan government penned an agreement for the establishment of the new equity investment fund, while also inking a memorandum of understanding for the hosting of FEDA’s permanent HQ in Kigali.

Afreximbank says that there is an initial fund target size of US$500mn, which is expected to grow to over US$1bn within a few years. The bank has itself committed US$350mn to the fund.

It notes that FEDA has been established to facilitate foreign direct investment flows into Africa’s trade and export sectors and to fill an annual equity funding gap of US$110bn in export-related sectors.

The aim is for FEDA to provide seed capital to companies and boost intra-African trade and value-added exports, with support targeted across a range of sectors, such as manufacturing, technology, healthcare, logistics and agribusiness.

With a particular emphasis on small and medium-sized enterprises (SMEs), FEDA will also offer related financial, non-financial and support services.

Speaking at the signing, Afreximbank’s president, Benedict Oramah, said: “Credit to the private sector [in Africa] remains stubbornly low compared to other regions of the world. Long-term commercial credit and investment funds are almost non-existent.”

Oramah added that Rwanda is the first of the bank’s 51 member nations to sign the agreement, but he believes others will follow. “What is critical is for countries to sign the establishment agreement to make it possible for FEDA to operate in their countries.”

Although, he noted that Rwanda must go through the process of ratifying the deal.

Afreximbank first announced plans for expanding its offerings to include equity investments nearly two years ago, having launched FEDA as a subsidiary in early 2019.

Since then, Philip Kamau, based in Cairo, has been acting as CEO of the fund, which also has two directors of investment.

According to Oramah, the government of Rwanda will initially provide a rent-free space for a period of two years in Kigali’s financial centre.