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Consortium of Global Multilateral Development Banks Calls for Measures to Support Trade Continuity in Sub-Saharan Africa

The report issued by a consortium of multilateral development banks and trade research institutionsrecounts the views of sub-Saharan banks on multi-lateral development banks’ (MDBs) responses to uphold a well-functioning trade finance market.

The report, which brings together perspectives & insights from 70 trade finance executives from 20 countries, unanimously calls for an urgent switch in the focus of support programs towards private sector and smaller enterprises to avoid a ‘second wave insolvency crisis’ that threatens greater, and far more widespread, economic hardship on the continent than we have seen till now.

Demand for trade finance instruments in the first half of 2020 seems to have flattened compared to growth expectations, while banks, supplying those instruments, have typically “flown to safety” restricting their lending to existing clients. Overall, according to interviewees, the market has contracted from at least 10% on average from 2019 levels in volume and even greater in value because of furloughed projects and  investments. Full recovery is only anticipated by end of 2021 at the earliest.

Banks interviewed mentioned that their main constraints revolved around risk uncertainties / macro prudential limitations to extend credit outside of their comfort zone, especially during a persisting pandemic.

The report makes several priority recommendations for MDBs. These include a switch in focus to private sector support, increasing availability of risk-sharing instruments as well as a more granular funding offering. The report also illustrates the need to emphasize pooling of efforts and resources across MDBs and DFIs operating in Africa to respond more effectively to the unfolding situation.

Contributing organizations include the African Development Bank (AfDB), the Arab Bank for Economic Development in Africa (BADEA), the Banque Ouest-Africaine de Développement (BOAD), the East African Development Bank (EADB), the International Chamber of Commerce (ICC), the International Trade Center (ITC), the International Islamic Trade Finance Corporation (ITFC), and the Trade & Development Bank (TDB).

africanews.com

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