By William Kumwembe in Abuja, Nigeria:
Malawi is among African countries where the trade financing gap remains wide, affecting progress towards growth and development.
A recent Africa Trade Report issued by the African Export-Import Bank (Afreximbank) at its 32nd Annual Meetings underway in Abuja, Nigeria, shows that collectively the continent faces an annual trade finance gap of about $100 billion.
“This severely limits the ability of small and medium enterprises (SMEs), which make up 80 to 90 percent of businesses on the continent, to engage in regional trade,” the report says.
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Available figures show that just 18 percent of African banks’ trade finance portfolios support intra- African trade, reflecting a bias towards external markets.
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According to the report, the shortfall, exacerbated by high borrowing costs and stringent global banking regulations, restricts SMEs from scaling up their operations and integrating them into regional value chains.
Addressing journalists after the launch of the report, Afreximbank Group Chief Economist and Managing Director of Research Yemi Kele said initiatives such as Afreximbank’s $17.5 billion trade finance disbursements are critical steps towards narrowing the gap.
Kele, however, said broader access to affordable credit and harmonised financial regulations remain urgent priorities to unlock the full potential.
“We need to strengthen our domestic financial institutions. The solution is within; we have to talk among ourselves and build the capacity of African institutions to finance growth interventions,” he said.
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The Afreximbank official added that while entities such as the African Continental Free Trade Area (AfCFTA) are designed to boost intra- African trade, their success hinges on closing the trade financing gap.
AfCFTA Secretary General Wankele Mene said enhancing trade finance would help capacitate regional traders and propel the intra- Africa trade agenda.
In 2024, an alliance of African-owned and controlled multilateral financial institutions was launched to reposition Africa within the global financial system by finding innovative financing solutions to advance the continent’s sustainable economic development and regional integration goals.
It has contributed to narrowing the financing gap in Africa, and as of July 2024, the alliance had pledged $62 billion towards trade and investment-related programmes.
Afreximbank alone disbursed $17.5 billion in 2023, trimming the continent’s estimated $100 billion trade finance gap.
