Africa needs urgent trade finance boost in the wake of COVID-19, says report

There is an urgent need for financing to reenergize Africa’s trade in the wake of the COVID-19 pandemic, according to the latest trade finance report released by the African Development Bank and the African Export-Import Bank. 

According to the report, only 40% of Africa’s trade is bank-intermediated – a far lower share than the global average of 80%. The trade finance gap also remains unacceptably high at $81 billion in 2019. The report found that these are some of the structural challenges that hinder banks’ ability to effectively intermediate Africa’s trade with the world. 

It says that development finance institutions are playing a more active role in supporting the trade finance industry in Africa. More than half of banks engaged in trade finance activities between 2015 and 2019 received support from DFIs to expand their transactions. Yet, DFI support is skewed towards particular sub-regions and financial intermediaries – mainly foreign-owned private banks, according to the report. 

The report made recommendations to boost trade finance supply in Africa, including raising awareness about the impact of stringent regulatory requirements on sector intermediaries and addressing geographical and institutional disparities in DFI support to the sector.