Trade Finance Initiative

Prepared by the Private Sector and Microfinance Operations Dept.

April 2009

Rev.1

2

Introduction…

• Although it has supported specialized trade organizations such as Afreximbank and ATI, traditionally the AfDB has focused on long-term project and corporate finance.

• However, the global financial crisis has convinced the Bank’s Board to consider a Trade Finance Initiative of up to USD 1 billion from the AfDB’s resources.

• The TFI is organized into 2 phases:

– Short-term initiatives (Trade Finance Lines of Credit)

– Medium-term initiatives (Partnership Programs)

3

The AfDB has allocated up to USD 500 million for TF LOCs

• Product – funded line of credit to a bank to support its trade finance operations (exclusion list)

• Structure – USD or EUR, revolving

• Security – senior unsecured obligation of the bank

• Maturity – up to 3 years, bullet or amortizing repayment

• Disbursement – 2 tranches (2nd on review of 1st)

• Size – depends on business needs, creditworthiness, maximum 50% of bank’s equity

• Pricing – depends on risk assessment

Trade Finance Lines of Credit

4

The AfDB is looking for partnership opportunities to leverage its resources

• Survey of Trade Finance Constraints and Needs

• GTLP – considering an additional USD 500 million through the Global Trade Liquidity Program– Critical Issue – respecting the Bank’s regional mandate

• GTFP – considering opportunity to scale up the IFC’s unfunded trade facilitation program

• Would consider opportunities to scale up the trade finance programs of other development partners.

Medium-Term Initiatives

5

In conclusion...

• Although trade has not been a focal area for the AfDB, the magnitude of the crisis has compelled the Bank to respond.

• The AfDB will now offer funded short-term revolving lines of credit for trade finance to creditworthy banks. Up to USD 500 million has been allocated for this product.

• The AFDB is keen to leverage the trade finance programs of partner institutions. We are working towards a contribution of USD 500 million for the GTLP and will consider programs of other partners to increase reach and scale.