Bank One Limited of Mauritius has been given a $40 million trade finance package by the African Development Bank. A $15 million Transaction Guarantee and a $25 million Risk Participation Agreement are included in the package.
With the use of the transaction guarantee facility, the African Bank will be able to guarantee up to 100% of the non-payment risk associated with the confirmation of Bank One trade finance instruments to the confirming banks.
Contrarily, the risk participation agreement will offer a guarantee cover of up to 50% to support trade finance transactions that are the result of issuing banks in regional member nations.
The package is anticipated to assist Bank One in expanding its ability to meet the demands of local corporates and Small-and Medium-sized Enterprises (SMEs) in Mauritius and beyond the continent for trade financing.
“Given the cross-sectoral nature of trade, the proposed facility, while leveraging Bank One’s footprint, is expected to enhance the African Development Bank’s efforts to integrate Africa and improve the quality of life for the African people,” said Lamin Drammeh, the Bank’s Head of Trade Finance, on the approval.
The African Development Bank’s Deputy Director General for Southern Africa, Kennedy Mbekeani, whose responsibilities also cover Mauritius, added, “This approval affirms the Bank’s support for financial integration as a cornerstone for the development of the private sector across the continent.”
The yearly trade finance deficit in Africa is estimated by the African Development Bank to be around $81 billion. SMEs and other domestic companies have more difficulties obtaining trade finance compared to multinational corporations and significant local corporations.
The African Development Bank is using a number of strategic measures to close the trade finance gap across the continent, including the transaction guarantee and risk participation agreement.