The Board of Directors of the African Development Bank Group has approved a $50 million risk participation agreement with Crédit Agricole Corporate and Investment Bank.
The agreement will enable African banks and their small and medium-sized enterprise (SME) clients to participate more in regional and international trade. It aims to support a cumulative business transaction volume of $450 million over the next three years.
“This agreement builds trust between the various African players to encourage a new trade dynamic on the continent,” said Mohamed El Azizi, Managing Director of the African Development Bank for North Africa. “And this is crucial for the realization of the African Continental Free Trade Area, which will help build resilience, generate growth and promote a recovery that creates opportunities and jobs.”
Stefan Nalletamby, Director of Financial Sector Development at the Bank, said: “This partnership will enable Crédit Agricole CIB, an institution renowned for its commitment to Africa, to finance more trade by further supporting local banks. When fully operational, the partnership could support some 50 local issuing banks and their corporate clients in different African countries. It should serve as a catalyst for major trade flows over the next three years.
The risk participation agreement aims to meet the growing demand from African markets for trade finance in vital economic sectors, such as agribusiness, energy, manufacturing, healthcare and services. It will also encourage productive diversification in several African economies, creating more jobs and tax revenue.
By ensuring commercial banks and African SMEs have access to trade finance, the agreement will boost economic growth and regional integration.
Currently, most African banks are poorly capitalized – a situation made worse by the negative ripple effects of the Covid-19 pandemic – which limits their ability to access credit lines from international banks. This difficulty has been compounded by the tightening of capital and regulatory requirements related to compliance, which has led international banks to reduce their exposures and the size of correspondents in Africa.
The approval of the Risk Participation Agreement aligns with the African Development Bank’s High 5s strategic vision to establish the conditions for strong, sustainable and inclusive growth on the continent.
Crédit Agricole CIB is the Corporate and Investment Bank of Crédit Agricole, the 10th largest bank in the world by the size of its balance sheet in 2021 (The banker, July 2022). It offers its corporate and institutional clients a wide range of services in the areas of capital markets, investment banking, structured finance, commercial banking and international trade. The Bank is a pioneer and leader in climate finance, with a full range of solutions for its clients. More than 8,900 employees in Europe, America, Asia-Pacific, the Middle East and Africa support the Bank’s clients in meeting their financial needs worldwide. For more information, visit: www.ca-cib.fr