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Trade Finance Initiative

Trade Finance Initiative. Prepared by the Private Sector and Microfinance Operations Dept. April 2009. Rev.1. 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.

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Trade Finance Initiative

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  1. 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 Trade Finance Lines of Credit • 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

  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.

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