AfDB Approves $4M Trade Finance Guarantee to Boost SME Growth in Sierra Leone
The African Development Bank has approved a $4 million trade finance transaction guarantee for Access Bank Sierra Leone Limited (ABSL) to support small and medium-sized enterprises (SMEs) and local firms in Sierra Leone.
This AAA-rated guarantee will provide 100 percent cover to international confirming banks for the non-payment risk taken on ABSL’s trade finance transactions conducted on behalf of SMEs, local corporates, and women-led businesses in Sierra Leone, a transition state. It will enable ABSL to support the importation of strategic consumer goods such as rice, cereals, cooking oil, and related soft commodities within key value chains. The facility is expected to support about $36 million of trade over the next three years and promote intra-Africa trade in line with the aspirations of the Africa Continental Free Trade Area (AfCFTA).
“This facility represents a pivotal moment for Sierra Leone’s private sector development,” said Lamin Drammeh, Head of Trade Finance at the African Development Bank. “By addressing critical financing gaps, we’re enabling SMEs to participate more actively in regional and global trade, ultimately contributing to job creation and improved livelihoods,” he emphasized.
Ganiyu Sanni, Managing Director at ABSL, said: “This AAA-rated guarantee will help us grow our trade finance book and support Sierra Leone. Particularly, it will support our issuances of trade finance transactions in critical sectors such as agribusiness (importation of strategic soft commodities) and trading of intermediate goods.”
The Transaction Guarantee is one of the trade finance instruments offered by the African Development Bank to support local banks in Africa. It was launched in 2021 and covers an array of trade finance instruments, including confirmed letters of credit, trade loans, irrevocable reimbursement undertakings, avalized bills, and promissory notes. Through this instrument, the Bank leverages its “AAA” rating to mitigate country risk and local bank counterparty for confirming banks.
The facility is tailored to the needs of letter of credit (L/C) issuing banks that are often compelled to provide cash margin for their L/Cs, have used up their L/C confirmation lines with correspondent banks, or find it difficult to obtain those lines in the first place. Banks registered and operating in Africa can access it after passing the Bank’s due diligence process. The Bank also offers 3.5-year trade finance lines of credit to local banks to support importers and exporters.
