The African Development Bank (AfDB) and Exim Bank Tanzania have signed a $10 million trade finance guarantee facility aimed at expanding the lender's capacity to support businesses engaged in regional and international trade. This facility is expected to enable more confirming banks to support transactions originated by Exim Bank, potentially widening access to trade finance for small and medium-sized enterprises and local corporates involved in imports, exports, and cross-border value chains.
Under the Trade Finance Transaction Guarantee Facility, AfDB will provide guarantees of up to 100 percent to confirming banks against eligible non-payment risks arising from letters of credit and similar trade finance instruments issued by Exim Bank Tanzania. This arrangement is expected to strengthen Exim Bank's ability to support businesses seeking opportunities in regional and international markets. Exim Bank Tanzania Chief Financial Officer Shani Kinswaga said the facility would strengthen the bank's ability to support businesses.
The facility will also enable Exim Bank to establish relationships with a broader network of confirming banks, potentially helping address some of the constraints that can arise when banks assess the risks associated with trade finance instruments. Ms Kinswaga said the additional risk support would allow the bank to pursue eligible trade transactions while maintaining its existing risk-management and credit standards. This will benefit businesses that rely on trade finance to import raw materials, machinery, equipment, and finished goods.
The partnership also supports efforts to increase intra-African trade and advance the objectives of the African Continental Free Trade Area by strengthening the capacity of a Tanzanian financial institution to facilitate cross-border transactions. For AfDB, the facility provides a mechanism to use its risk-bearing capacity through a local financial institution to help address trade-finance constraints. AfDB Country Manager Mary Monyau said trade finance was an important enabler of economic activity.
Ms Monyau said stronger trade-finance capacity could also support productive sectors, including agriculture, manufacturing, energy, and commerce, by helping businesses access inputs, equipment, and markets. The facility is expected to benefit businesses that rely on trade finance to import raw materials, machinery, equipment, and finished goods, as well as exporters seeking financial instruments to fulfil contracts with buyers in regional and international markets.
Exim Bank Tanzania and AfDB have expressed optimism that this partnership will create opportunities for small and medium-sized enterprises, commercial, and corporates with genuine productive and trade-related financing needs. The value of this partnership will be measured by the opportunities it creates for customers.
Ultimately, the partnership between AfDB and Exim Bank Tanzania aims to support Tanzania's growing trade ambitions and deepen Exim Bank's trade finance business while supporting Tanzanian businesses to participate more confidently in regional and international markets.
Key points
- The facility will enable Exim Bank to establish relationships with a broader network of confirming banks.
- The partnership supports efforts to increase intra-African trade and advance the objectives of the African Continental Free Trade Area.
- The facility provides a mechanism to use AfDB's risk-bearing capacity through a local financial institution to help address trade-finance constraints.
