Afreximbank targets SME traders with US$400mn China-backed loan

The African Export-Import Bank (Afreximbank) has signed a US$400mn term loan facility with the China Development Bank (CDB) which aims to improve access to trade finance for SMEs on the continent.

Afreximbank says it will deploy the facility to smaller companies involved in trade, both externally and within Africa, as well as those engaged in productive sectors. Because the facility is provided by CDB at relatively low pricing, it says it can transfer that financial advantage to end beneficiaries.

The facility has a seven-year tenor and will be distributed directly by the Cairo-headquartered multilateral financial institution or through local financial intermediaries, it adds.

“African SMEs continue to struggle to access adequate and affordable financing for growing their businesses,” Afreximbank says.

The difference between demand and supply for financing facilities in Africa is estimated to total around US$81bn a year, according to the African Development Bank.

UN research has found limited company information and perceived high risk among lenders, as well as a low level of digitisation, mean African SMEs are often unable to obtain trade finance facilities at affordable rates.

The facility – the fourth time CDB has collaborated with Afreximbank – will also strengthen ties between Africa and China, notes Benedict Oramah, the institution’s president and chairman of its board of directors.

“It will also enable our two institutions to achieve our respective mandates and developmental outcomes, which include job creation, increased economic activity and increased extra-African trade with China,” he says.

Though China’s development finance institutions have historically provided significant support to Africa, there are signs lending has been scaled back in recent years.

A February study found the CDB and Export-Import Bank of China committed a combined total of US$10bn in support in 2020 and 2021 – down from more than US$37bn during the previous two years.