CDC Supports TDB To Boost Trade Recovery In Africa

Recently, a USD 100 million finance commitment has been announced by the CDC group, A public funded UK’s development finance institution to the Eastern and Southern African Trade and Development Bank (TDB).

This agreement of investment is focused on aiding TDB’s capacity to facilitate finance to the African companies looking for the short-term finance sources, along with those who are struggling with the adverse economic effects of global pandemic. Apart from this, recently a statement was put out by Shirish Jain, program director at Proxtera explaining that a number of trade finance instruments need to increase their quality and operational limitations for supporting SMEs in global trade operating with lower invoice values compared to big corporates.

Managing Director CDC, Tenbite Ermias explained, “We are very pleased to boost our association with TDB to provide aid essential trade and investment in Eastern and Southern Africa. Securing trade is vital to speed up the economic recovery from COVID-19, maintain livelihoods, and facilitate development. Being a development finance institution, it is our duty to provide funds in the constrained markets, assisting to support the economic and social growth of the communities we are focused on.”

The aforesaid commitment of CDC provides assistance to the import, exports and production of planned inputs and agriculture commodity goods in the 22 member states with TDB’s operations, with a powerful focal point on the economies with the complex investment opportunities.

As per the explanations given by the parties, the investment will help TDB in providing top-up loans and very required fund capital to various new and existing TDB customers, which will result in ultimate boost in the import and exports.

Further, it adds that this arrangement “has been introduced at a time when the sources of finance for local firms and importers are more restricted across the African continent”.

When the global pandemic hits the world economy, it caused a complex procedure of accessing trade finance in Africa, but it was also a big problem even before COVID-19, where the International Chamber of Commerce predicted the trade finance gap up to US$120bn.

According to TDB, several areas of financing have experienced a worst scenario since the outbreak of the global pandemic, which has witnessed “decreased liquidity and boosted financing expenses in the commercial bank market”.

In the report released in October last year, it was stated that multilateral development banks (MDBs) are required to provide finance aid to the continent, otherwise potential insolvency issues could arise.

As per the paper generated by the various African-focused MDBs and trade development institutions, which also includes TDB and commercial banks, it explained that there is a much-needed requirement of shifting towards the private sector and MDB programs that guide smaller firms.

It has been noted by the interviewed banks for the report that there were restrictions on their part to facilitate funds outside of their knowledge or big customers because of the macro-prudential limitations, for example, and requested MDBs to consider an improved percentage of risk handling.

The global pandemic has put its adverse effects on the African economy throughout the country, with the prediction of the World Bank regarding development in Sub-Saharan Africa to decrease to  -3.3% in 2020 - this type of fall would make the continent experience its first recession in over two decades.

A number of economies in TDB’s region of operations have been adversely affected. It also includes Zambia, with the nation becoming the first country on the continent to make a payment default since the outbreak of the global pandemic.

TDB has been providing aid to the exporters and importers in its areas of activities throughout the global pandemic, signing two deals with the World Bank Group in July, for example.

In one, €359mn guarantee was announced by the World Bank’s Multilateral Guarantee Investment Agency with a period of up to 10 years to aid a syndicated loan facilitated to TDB by a collection of global lenders.

In addition to this, it was noted that this facility would be able to shift TDB’s long-term finance sources as well as boost essential food and fuel imports to its 22 member countries.

It includes nations with some of the decreased GDP per capita figures worldwide, some of which, for example, the Democratic Republic of Congo, Burkina Faso and Somalia are affected by the dispute.


Other news

Most Recent Blogs View All Blogs

23 Feb

Tips To Consider Before Applying For A Bank Loan

If you are thinking of applying for a personal loan to cater to your any type of business needs or f...

11 Feb

How Does Documentary Collection Work?

What Is A Documentary Collection?A documentary collection is a legal procedure that allows an export...

05 Feb

Bank Guarantee FAQs

1. What Is A Bank Guarantee(BG) ?A bank guarantee is a type of trade finance instrument issued by a ...

Disclaimer Disclaimer Disclaimer