IFC and Partners Launch Initiative to Boost Trade Finance in Africa
The International Finance Corporation (IFC), a member of the World Bank Group, announced on Tuesday the launch of a new initiative to increase access to trade finance for small and medium-sized enterprises (SMEs) in Africa.
The initiative, called the Africa Trade Finance Program (ATFP), aims to mobilize $1 billion of trade finance over the next three years to support more than 250,000 SMEs across 28 African countries.
Trade finance is a key enabler of cross-border trade and economic growth, especially for SMEs, which account for about 90 percent of businesses and 80 percent of employment in Africa. However, according to the African Development Bank, there is a trade finance gap of $81 billion in Africa, which hampers the ability of SMEs to participate in regional and global value chains.
The ATFP will address this gap by providing risk-sharing facilities and technical assistance to local banks and other financial institutions that offer trade finance products to SMEs. The program will also leverage digital technologies and platforms to enhance efficiency and transparency of trade transactions.
The ATFP is supported by a coalition of partners, including the governments of Canada, Denmark, Germany, Japan, Norway, Sweden, Switzerland and the United Kingdom, as well as the African Development Bank, the European Investment Bank and the Islamic Development Bank.
Makhtar Diop, IFC’s Managing Director, said: “Trade is a powerful engine of growth and job creation. By working with our partners to increase access to trade finance for SMEs in Africa, we can help them tap into new markets and opportunities, boost their competitiveness and resilience, and contribute to a more inclusive and sustainable recovery from the COVID-19 pandemic.”
Albert Zeufack, World Bank Chief Economist for Africa, said: “Trade finance is essential for economic development and poverty reduction. The ATFP will help unlock the potential of African SMEs to integrate into regional and global value chains, diversify their exports, and create more jobs for young people and women.”
The ATFP is part of IFC’s broader efforts to support trade and investment in Africa amid the COVID-19 crisis. In fiscal year 2021, IFC committed $6 billion in long-term financing for private sector projects in Africa, of which $2 billion was mobilized from other investors. IFC also provided $4.6 billion in short-term financing through its Global Trade Finance Program and its Global Trade Liquidity Program.
