The deal with British International Investment BIIaims to help ease the trade financing gap in Africa, estimated at between 100 billion and 120 billion. The funds will be used to provide liquidity to small- and medium-sized businesses in Africa in sectors such as agriculture and health care, said Mosa Tshabalala, Absas head of fixed income trade sales.
'Absa and BII have been working together for the past five years to provide much-needed trade liquidity in countries such as Nigeria, Kenya and others to support over 1 billion in trade volumes,' Tshabalala said in response to questions.
'This partnership has now been extended through the provision of a 150 million investment to Absa, ring-fenced and purposefully designed toward markets where there is high need for trade finance but not as much coverage from other commercial sources,' he said.
Trade financing refers to funds needed to buy and sell goods across borders. Third parties step in to cover costs such as shipping, insurance and raw materials, until a sale is made and payment received, providing funds or payment to the exporter, while the importer might also be extended credit to fulfil the trade order making it far easier for businesses to trade.
In Africa, sources of trade financing are often limited, difficult to access, and expensive. In many cases, the absence of trade financing has curbed Africas ability to scale cross-border trade and develop additional economic integration. Banks teaming up with development finance institutions can make it easier and cheaper for all parties involved to provide the necessary funds for cross-border trade.
