The Board of Directors of the African Development Bank Group (AfDB) has approved a dual-currency Trade Finance Line of Credit for ECOWAS Bank for Investment and Development (EBID) comprising $50 million and €50 million.
In a statement on Wednesday, the AfBD stated that an additional co-financing of $30 million for the credit line would come through the Africa Growing Together Fund (AGTF) from the People’s Bank of China (PBOC).
EBID would use the three-and-a-half-year facility to provide direct financing to local corporates, it stated.
According to the AfDB, part of the facility would also be channelled through select local banks for on-lending to key sectors such as agriculture, infrastructure, and transport.
It stated further that the ultimate beneficiaries would be the Small and Medium-sized Enterprises (SMEs), local enterprises cooperatives and farmers in the West Africa region.
Speaking soon after the Board approval, the Deputy Director General for the West Africa Region, Joseph Ribeiro noted that regional development finance institutions like EBID are key partners of the African Development Bank and serve markets and client segments critical to the overall development of the continent.
“They play an important role in promoting trade and regional integration. This is the Bank’s first financing support to EBID, and we look forward to an even stronger partnership in the near future,” he said.
The Bank’s Head of Trade Finance, Lamin Drammeh, stressed the critical need for such support in the region.
“We are excited to work with EBID to increase access to trade finance in the ECOWAS region with a special focus on the agriculture value chain, SMEs and women-owned businesses”, he said.
“Regional institutions like EBID complement the Bank’s efforts to bridge the trade finance gap in Africa and serve as an effective conduit for channeling much-needed funds to underserved countries and sectors”, he added.
The AfDB estimated the annual trade finance gap for Africa to be around $81 billion.
“Compared to multinational corporates and large local corporates, SMEs and other domestic firms have greater difficulty in accessing trade finance,” it added.
Meanwhile, the AfDB and the Government of Canada have established a new special fund to support Africa’s small and medium-sized enterprises (SMEs) in the agriculture sector.
The Agri-food SME Catalytic Financing Mechanism aims to catalyse and de-risk investment for agriculture SMEs, as well as strengthen agricultural value chains and improve food security across the continent.
The two organisations made the announcement at a press conference held during at the Dakar 2 Africa Food Summit, recently.
“At the Africa Food Summit, we have seen a strong commitment to addressing the financing gap for SMEs and creating an environment that encourages private sector investments in climate-smart, gender-oriented agricultural solutions,” the bank’s Vice President for Agriculture, Human and Social Development, Dr. Beth Dunford, told reporters.
“The Agri-food SME Catalytic Financing Mechanism will help unlock opportunities for these businesses in Africa, particularly for women and youth,” she said.
Canada contributed CAD 100 million ($73.5 million) to fund the mechanism, which was hosted by the AfDB.
Small and medium agri-businesses produce, process or transport around 65 per cent of Africa’s food, yet they face a financing gap of more than $180 million annually.
The mechanism would provide concessional finance and technical assistance to financial intermediaries including agribusinesses, micro-finance institutions and impact funds.
The finance and assistance aim to enable the intermediaries to make loans to agri-SMEs working with women, and businesses that build resilience to climate change.
The Agri-food SME Catalytic Financing Mechanism would add to the Bank Group Affirmative Finance Action for Women in Africa’s (AFAWA) goal of closing the $42 billion access to finance gap for women-led SMEs and to accelerate their growth.
The mechanism represents the bank’s first blended financing facility to specifically target SMEs operating across the agricultural value chain. It mobilises public funds to de-risk agricultural financing, crowds in support to make SMEs more bankable, and collaborates with providers of capital to make banks more ‘agriculture-friendly’.
“The best way to build up food security in Africa is to work with small-and-medium-sized agriculture and food businesses. Through a shared commitment between Canada and the African Development Bank, the Agri-food SME Catalytic Financing Mechanism will advance resilient growth and climate adaptation. It will also help African SMEs to pursue climate smart models, and support women by shifting attitudes that perpetuate gender gaps in financial inclusion,” said Anita Vandenbeld, Parliamentary Secretary to Canada’s Minister of International Development.