Trade Finance in Africa GTR East Africa Trade

  • Slides: 11
Download presentation
Trade Finance in Africa GTR East Africa Trade & Commodity Finance Conference 2017 Lamin

Trade Finance in Africa GTR East Africa Trade & Commodity Finance Conference 2017 Lamin M Drammeh www. afdb. org/trade-finance-program/

Trade Finance in Africa Af. DB 2016 Survey • Coverage – 49 countries 246

Trade Finance in Africa Af. DB 2016 Survey • Coverage – 49 countries 246 banks • Total bank-intermediated Trade Finance • USD 400 billion (30% of Africa’s trade) • Gap – USD 100 billion • Relatively low risk asset class üNPL of 5% vs 12% for all asset classes ØRegional differences in TF NPL levels

Trade Finance in Africa Top confirming banks Société Générale Natixis UBAF Deutsche Bank Standard

Trade Finance in Africa Top confirming banks Société Générale Natixis UBAF Deutsche Bank Standard Chartered Bank Citibank Commerzbank 2. 4% 3. 3% 4. 6% 6. 8% 8. 0% 8. 9% 10. 2%

Constraints to Trade Finance 8% 6% Client Credit Worthiness 35% 9% Insufficient Collateral Single

Constraints to Trade Finance 8% 6% Client Credit Worthiness 35% 9% Insufficient Collateral Single Obligor Limited Forex Liquidity 11% Insufficient Limits with Correspondent Banks Bank Balance Sheet Constraint 30% Regulatory requirements Low country credit rating Low Issuing Bank credit rating AML/KYC 76% 82% 86% 90% Source: WTO 2016 Global Trade Finance Survey: Significant/very significant impediments to TF

Banks’ Trade Finance Portfolio New Clients 14% 28% 58% Top 10 Clients SMEs

Banks’ Trade Finance Portfolio New Clients 14% 28% 58% Top 10 Clients SMEs

Is SMEs a risky segment - NPLs? 13% 11% 3% 2% 16% 11% 31%

Is SMEs a risky segment - NPLs? 13% 11% 3% 2% 16% 11% 31% Africa TF NPLs SMEs 14% New Clients 3% All TF clients 5% 11%

Intra-regional Trade Flows Positive correlation – intraregional trade and development 17. 8% 68. 5%

Intra-regional Trade Flows Positive correlation – intraregional trade and development 17. 8% 68. 5% 50. 2% 8. 8% 52. 3% 17. 7% 25. 8% Source: WTO International Trade Statistics 2015

Intra-Africa trade finance by region Positive correlation - Intra-Africa trade finance and regional integration

Intra-Africa trade finance by region Positive correlation - Intra-Africa trade finance and regional integration 4. 5% 17. 4% 25% Africa Ø 20% of banks’ financing 3. 6% Ø Net oil exporting countries -10% Ø Net oil importing countries - 21% 24. 5%

Af. DB in Trade Finance USD 1 Billion Trade Finance Program - 2013 Risk

Af. DB in Trade Finance USD 1 Billion Trade Finance Program - 2013 Risk Participation Agreement Trade Finance Line of Credit Soft Commodity Finance Facility (Guarantees) (Liquidity) (Agriculture) Trade enabling policies, Infrastructure projects, T/As

Af. DB’s TF Journey so far § Supported more than USD 5 billion of

Af. DB’s TF Journey so far § Supported more than USD 5 billion of trade in Africa § Guaranteed > 1, 300 trade transactions – 49% SMEs § 25% of trade transactions supported are intra-Africa § 6 active confirming banks • More than 300 Issuing Banks § Coverage - 48 African countries § Conducted 2 continent-wide surveys on TF in Africa

What we can do together To unlock Africa’s huge potential and accelerate economic development

What we can do together To unlock Africa’s huge potential and accelerate economic development and social progress we need to increase access to finance for SMEs and facilitate more trade: v Explore other financing vehicles – Trade funds, insurance companies, Supply Chain Financing, receivables financing v Strengthen the capacity of local banks v Enhance ecosystem collaboration – – – Blockchain/Fintechs - Ecobank Fintech competition, M-Shwari Trade facilitation programs of MDBs More research and thematic studies Risk Perception management – AML/KYC Advocacy for conducive regulatory environment Explore solutions to hard/soft infrastructure challenges