RABAT, July 29 (Xinhua) — The African Development Bank (AfDB) has approved a 70-million-U.S. dollar risk-sharing agreement for Morocco’s Banque Centrale Populaire (BCP) to support international trade, Morocco’s official news agency MAP reported Friday.
According to the report, the agreement aims to enhance the capabilities of African banks and their small and medium-sized enterprise (SME) clients by fostering trust within the African banking system. This, in turn, will facilitate the growth of regional and international trade.
The agreement also seeks to improve access to trade finance instruments for SMEs across multiple African countries.
It was highlighted that the agreement will have a direct positive impact on African issuing banks, which face limitations in their trade financing activities due to insufficient confirmation lines from international banks.
The risk-sharing agreement, formally known as the Risk Participation Agreement, enables the AfDB and a commercial bank to mutually share the default risk associated with a portfolio of trade finance transactions. Under this arrangement, the AfDB typically covers up to 50 percent of the risk, providing regional and international commercial banks with partial cover for their trade finance operations in Africa.
Credit: The Star : News Feed
