AFC and Munich Re launch $1 billion trade programme
By the AFREEQUE newsroom, based on Financialafrik
Africa Finance Corporation and German reinsurer Munich Re are setting up a risk-sharing programme with a capacity of $1 billion to support trade finance. The first phase is to cover letters of credit, trade loans and guarantees for 38 financial institutions in 11 countries, according to Financialafrik.
Africa Finance Corporation (AFC), a pan-African development finance institution, and German reinsurer Munich Re announced on 27 October a $1 billion risk-sharing programme to support trade finance by African banks, according to Financialafrik.
The mechanism covers some of the risks associated with AFC loans to African financial institutions. Munich Re automatically assumes a share of eligible transactions, while AFC retains a portion of the risk. The capacity mobilised can be reused when transactions mature.
The first phase covers 38 financial institutions in 11 countries and includes letters of credit, trade loans and trade guarantees. AFC and Munich Re plan to gradually extend the scheme to other instruments and sectors, particularly to support intra-African trade.
Banji Fehintola, an AFC board member and head of its financial services, believes development finance cannot rely solely on loans recorded on institutions’ balance sheets. He describes mobilising private capital and sharing risks as ways to increase the finance available.
