The African Development Bank (AfDB) has signed a $ 250 million unsecured risk-sharing agreement with South African bank Absa Bank, according to a press release issued for the purpose.
Through this agreement, the two entities will share the risk of default on a portfolio of eligible commercial operations emanating from African issuing banks and compensated by Absa, the note said. “The ADB is committed to assuming up to 50% of each underlying transaction issued, while Abs will confirm the transaction and assume the remaining risk,” she adds.
The agreement will strengthen the ability of African issuing banks to leverage trade finance through a multi-sectoral approach.
“This facility, through a 50:50 risk-sharing approach, will help promote widespread economic growth on the African continent through increased facilitation of import-export activities by African businesses and SMEs, and increase intra-African trade and regional financial integration, “said Stefan Nalletamby, director of financial sector development at Absa.
