COMESA offered $300m from Africa bank for more trade
July 25—About 43 financial institutions operating in the Common Market for Eastern and Southern Africa (COMESA) are in the running to provide onward lending from a $300 million credit facility meant for boosting business across the region.
This follows approval by the African Development Bank (AfDB) board to release the money through the Eastern and Southern African Trade and Development Bank (TDB).
Formerly the PTA Bank and with assets of some $5.6 billion, the TDB is headquartered in Bujumbura, Burundi.
The COMESA regional trade and project finance package consists of a composite funded trade finance and project finance facility, and an unfunded trade finance risk participation agreement (RPA).
AfDB’s Financial Sector Development Director, Stefan Nalletamby said in midweek, “The RPA will enable the Bank and the TDB to share confirmation risk on African issuing banks. This will promote broad-based economic growth on the African continent by making international trade easier. It will benefit no less than 43 financial institutions operating in over 15 regional member countries, catalysing up to $2 billion worth of trade over the three-year period.”
The member states of COMESA are Burundi, the Comoros, the Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Sudan, Swaziland, Seychelles, Uganda, Zambia and Zimbabwe.
Trade finance allows companies to receive a cash payment based on accounts receivables in case of factoring. A letter of credit issued by a bank helps the importer and exporter to enter into a trade transaction and reduce the risk of nonpayment or non-receipt of goods.
The money is expected to scale up intra-African trade, and foster regional integration. The trade finance funding will boost the import-export trade activities of local corporates and SMEs, while the project finance component will support regional infrastructure development.
TDB provides trade and project finance for projects in high impact sectors. The TDB’s shareholders include 22 countries in East, North and Southern Africa as well as two non-regional countries. AfDB is a shareholder, alongside other institutional investors.