AfDB Approves $30m Trade, SMEs Finance Facility for Family Bank
The Board of Directors of the African Development Bank Group has approved a $30 million Trade & SME Finance Facility for Family bank Limited (FBL) in Kenya, according to a statement released today in Abidjan.
According to AfDB, the facility is expected to boost intra-Africa trade, promote regional integration and contribute to the reduction of the trade & SME finance gap in the East African nation.
The Facility will boost intra-Africa trade, promote regional integration, and contribute to the reduction of the trade & SME finance gap in Kenya, by mobilizing significant financial resources for SMEs and local enterprises.
This will enhance and deepen value chains, and diversify productive capacity, ultimately stimulating growth in Kenya. FBL will use the short-term trade facility to complement the Line of Credit and provide shorter-term trade loans along value chains of SMEs and local corporate businesses.
In addition, the TG Facility will allow the Bank to provide up to a 100% guarantee to Confirming Banks for the non-payment risk arising from the confirmation of letters of credit and similar trade finance instruments issued by FBL.
All this is on the back of the Africa Continental Free Trade Area (AfCFTA) agenda of reshaping markets and economies across the region by helping to boost output in the services, trade, manufacturing, and natural resources sectors.
Speaking soon after the Board approval, the Bank’s Acting Director for Financial Sector Development, Ahmed Rashad Attout said, “We are excited about finalizing this facility with FBL as a partner… scaling up its trade & SME finance offerings in Kenya to help meet the ever-increasing trade & SME finance gap.
“It will allow FBL to play a significant role in providing funding as is necessary for the post COVID-19 economic recovery of Kenya”.
AfDB estimates trade finance gap for the African continent at $82 billion. Compared to multinational corporates and large local corporates, SMEs and other domestic firms have greater difficulty in accessing trade finance and medium-term financing.
Also, the Bank’s Director General for East Africa, Nnenna Nwabufo said: “The advent of COVID-19 coupled with stringent regulatory/capital requirements and KYC compliance enforcement, has seen many global banks reduce their correspondent banking relationships in Africa, while some are exiting the market altogether.
“There is therefore an urgent need for financing to reenergize Africa’s trade, which requires more participation of institutions like the African Development Bank”.
The facility is aligned with the AfDB’s High 5 priority goals to: light up and power Africa; feed Africa; industrialize Africa; integrate Africa; and improve the quality of life for the people of Africa.
