John Adoyi, PBA Journalism MenteeThe Board of Directors of the African Development Bank Group (www.AfDB.org) has approved a trade finance transaction guarantee facility to Banque Commerciale Du Burundi (Bancobu). Leveraging Bancobu’s strategic footprint in the East African nation, this instrument will provide support to Small and Medium Sized Enterprises (SMEs) and local corporates, to facilitate their import and export trade finance requirements.
The Bank will provide a guarantee to Confirming Banks for the non-payment risk arising from the confirmation of letters of credit and similar trade finance instruments issued by Bancobu.
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Speaking soon after the Board approval, the Bank’s Director General for East Africa, Nnenna Nwabufo emphasized the critical need for such support on the continent. “We are excited about this partnership which will aid Bancobu to increase its trade finance support to critical sectors of the Burundian economy by leveraging the capital relief provided by the transaction guarantee,” she said. “This aligns with the Bank’s focus on private sector development through the provision of support to the financial sector,” she added.
Lack of adequate credit lines from international confirming banks has hampered Bancobu’s ability to support its clients. This facility will support the importation of critical inputs such as fertilizer, pharmaceuticals, solar energy panels, farm machinery and other intermediate goods that Burundi needs to revive its agriculture and manufacturing sectors.
The Bank’s Acting Director for Financial Sector Development, Ahmed Attout said the advent of COVID-19 coupled with stringent regulatory/capital requirements and KYC compliance enforcement, had caused many global banks to 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,” he said.
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