Tdb Chief: Influential Actors Choose To Label Trade Finance Wrongly

Recent shifts in debt restructuring practice are harming the classical trade finance asset class and African multilateral public development banks PDBs, says Admassu Tadesse, group president and managing director of the Trade and Development Bank Group. PDBs act as a near-last-resort trade financier, in an under-served continental marketplace characterised by extensive market failures.

Speaking at the Africa Investment Forum, Tadesse expressed growing concern over the evolving and unexpected challenges being faced by specialised trade financiers and international insurers covering Africa. Operating in a region already marked by economic volatility and in a challenging global context, these banks have been navigating turbulent conditions exacerbated by debt distress situations and debt restructurings across the continent.

While some of these creditors have responsibly deferred payments in the face of climate and Covid shocks and accommodated debtors, at times with concessional re-pricing, new restructurings have not taken such measures into account, penalising responsible African financial institutions that have simply issued classical short-term letters of credit, which conventionally is not generally subject to debt restructuring.

During a panel discussion at the Africa Investment Forum in Rabat last month, Tadesse drew attention to what he sees as unfair treatment of trade finance as an asset class.

Investors and insurers enter agreements with a clear understanding of the associated risks and the agreed norms in the asset class, he remarked in an interview with African Business on the sidelines of the event. But then, amid various shocks and debt restructurings, trade finance is now hastily and imprudently includedcontrary to existing conventions.