Standard Chartered and Africa Finance Corporation (AFC), a multilateral development financial institution, have launched a funded risk participation programme to increase the availability of trade finance in Africa.
The programme, a first between the two institutions, is expected to generate an estimated incremental trade volume in excess of US$350mn over the three-year life of the transaction. A spokesperson from Standard Chartered tells GTR that the financing is open and can be drawn down at any time.
The portfolio-based risk-sharing facility will see Standard Chartered and AFC “take up to a 50:50 basis on the underlying portfolio of the trade finance instruments through African issuing banks”, Standard Chartered says.
The programme’s beneficiaries are from over 25 countries and 100 issuing banks across the continent and are subject to certain underlying transactional criteria, the spokesperson explains. One of the conditions is that either leg of the transaction – the imports or exports – has to be in Africa.
According to Andrew Alli, AFC’s president and CEO, the programme will stimulate further work between the two institutions.
“In the wake of the global financial crisis, access to trade financing reduced significantly across emerging market, particularly in Africa. This was as a result of changing regulatory landscapes, as well as a general reduction in credit risk outlook,” he says.
“Our arrangement with Standard Chartered will help boost trade finance activities within the region. We will also be taking this relationship forward by working together on various other initiatives across corporate and regional trade.”
The announcement of the new programme comes just a week after Standard Chartered revealed details of a risk sharing agreement that it had signed with CDC, the UK’s development finance institution, which will see the two share the default risk on up to US$100mn of new loans originated in Zimbabwe.
Separately, Zimbabwe this month became the 19th state to join the AFC, opening up more opportunities for investment into the country’s infrastructure sector.