The International Finance Corporation (IFC) and BMCE Bank International Plc UK announced on Wednesday a partnership designed to support cross-border trade in Africa and prevent shortages of essential goods, including grains and building materials, amid the COVID-19 crisis.
IFC will enter into a risk-sharing facility with BMCE Bank International Plc UK, a leading regional lender, allowing the bank to scale up the financing it provides to importers and exporters. That capital, known as trade financing, is considered the backbone of the international trading system. The risk-sharing facility will cover 50 percent of losses on all eligible loans made by BMCE Bank International Plc UK, for a total portfolio of $150 million, says a statement by IFC.
The agreement comes as the COVID-19 pandemic has plunged Africa into its first recession in 25 years and stymied cross-border trade, with imports falling by an estimated 16 percent in 2020, according to the World Trade Organization.
Slowing trade can have far-reaching effects because few, if any, countries produce all the goods and services their populations require. Supporting trade in Africa is considered especially crucial. Ten of the top 20 rice-importing countries globally are located in Sub-Saharan Africa, according to the same source.
“We are very delighted to close this agreement with IFC. Origination and distribution are key to our business model, and thanks to privileged partners like IFC we will be serving our international and African customers by bridging the trade finance gap between Europe and Africa with a sustainable finance impact,” said CEO of BMCE International Plc UK, Houssam El Hak Morssi Barakat.
IFC will provide up to $75 million to the risk-sharing facility under its Global Trade Liquidity Program, to serve financial institutions active in 20 African countries, including six fragile or conflict-affected states. IFC’s support to BMCE Bank International Plc UK is underpinned by the International Development Association’s Private Sector Window Blended Finance Facility, which provides first-loss guarantees in low-income countries.
“The COVID-19 crisis has made the export and import of goods more challenging, but goods still need to move across borders to support businesses, feed households, and sustain livelihoods,” said Manuel Reyes-Retana, IFC’s Regional Industry Director for the Financial Institutions Group in Africa.
“Our risk-sharing facility with BMCE Bank International will support trading in these trying times and help ensure that Africans continue to have access to essential goods and services,” he added.