UK-led investments to close Africa’s trade finance gap

The British International Investment Group (BII), the UK’s Development Finance arm, has taken a significant step towards closing Africa's trade finance gap by extending a $150 million facility to South African lender Absa. The move comes in the wake of the World Bank annual meeting and aims to tackle the trade finance deficit in Africa, which is estimated to be over $100 billion. David Banson, Investment Manager at BII, shed light on the initiative in an exclusive interview with CNBC Africa. Banson highlighted the critical need for increased financing to bridge the trade finance gap in Africa. He emphasized the importance of providing businesses across Africa with the necessary funding to facilitate trade. The partnership with Absa, which has been ongoing for five years, focuses on reaching smaller markets that often struggle to access commercial capital. By structuring the financing program to target underserved markets such as Uganda, Rwanda, and Zambia, BII and Absa aim to ensure that smaller businesses in these regions benefit from the facility. Banson stressed that the availability of liquidity is essential for trade to occur efficiently, especially in markets where transactions are settled in foreign currencies. The $150 million facility will create more opportunities for businesses, particularly micro, small, and medium enterprises (MSMEs), to access finance for trade. The impact of the financing program will be measured by tracking where the funding is directed and the types of trades supported. Banson noted that a significant portion of the funding typically goes towards sectors like food security and raw materials for productive industries, contributing to economic growth and employment in these markets. Looking ahead, BII is committed to collaborating with other development finance institutions and financial partners to strengthen efforts in addressing the trade finance gap in Africa. By forging strategic partnerships aligned with their approach, BII aims to mobilize and catalyze additional funding for trade finance initiatives. The $150 million facility extended to Absa represents a critical step towards addressing Africa's trade finance challenges, emphasizing the importance of collaboration and targeted financing in driving economic growth and development in the region.