The International Finance Corporation (IFC) has inked a deal with US-headquartered Citi to provide cover worth Sh28.4 billion ($200 million) for the lender’s trade finance transactions with African banks.
The IFC said in disclosures published on Friday that the deal, known as the GTLP Citi ATRI Africa project, will encourage Citi to maintain and expand its trade finance offerings to African countries when many global banks are avoiding the risk of financing the continent.
The risk-sharing facility, which is pending board approval, is worth a total of $267 million (Sh37.9 billion), with IFC accounting for 75 percent of the amount.
The trade assets in the portfolio will be originated in Africa by Citi and/or its affiliates or subsidiaries, IFC added.
“Under the facility, IFC will provide up to 75 percent (or up to $200 million) of funded risk mitigation in the pool of eligible trade transactions between Citi and Emerging Market Issuing Banks (EMIBS) in African countries, ultimately supporting the importers and exporters of essential goods throughout the continent,” said IFC in the disclosures.
“By sustaining Citi’s ability to provide trade finance services in Africa despite major macroeconomic challenges, the project is intended to address the continent’s trade finance gap and increase and/or maintain access to trade finance for ultimate stakeholders including EMIBs and underlying importers and exporters in Africa.”
The IFC describes its risk-sharing facilities as bilateral loss-sharing agreements between it and banks or corporations (originators of assets) where the IFC reimburses them a portion of losses they incur in a portfolio of eligible assets.
Citi and the IFC had also established a fund along the same lines in 2020 to support trade finance and flows in developing countries as part of a plan to assist businesses cope with the difficulties occasioned by the Covid-19 pandemic.