Multinational - Commerzbank - AG


Project Summary

Approval Date 27 Mar 2018
Sovereign / Non-Sovereign Non Sovereign
Sector Finance
DAC Sector Code 24030
Commitment U.A 36,586,882.87
Status Approved

Project General Description

The proposed project is a unfinanced Risk Participation Agreement (RPA) of USD 50 million between the African Development Bank (AfDB) and Commerzbank AG under which the two banks agree to share the default risk on a portfolio of eligible commercial transactions initiated by African issuing banks (IB). Commerzbank is a tier 1 global banking group and key player in international trade finance. The group is based in Frankfurt with a strong commitment to Africa, notwithstanding its fewer correspondents on the continent. Commerzbank intends to reposition itself in Africa by raising its country limits and re-establishing its bank correspondence activities. Most African banks have a reduced capital base, which hinders their ability to obtain sufficient resources from international banks to finance trade and undertake large-scale operations having a significant impact on development. The proposed RPA will enable Commerzbank to raise the ceilings applied to African banks and thus extend the list of corresponding banks. This mechanism will serve to guarantee obligations arising from trade financing instruments such as credit confirmation and acceptance notes, export loans (before shipment) and import loans, financing of export/import bills, bonds and guarantees, to name but a few. Under this agreement, Commerzbank will place at local African banks’ disposal resources to finance trade and thus guarantee their TF commitments. Specifically, it will confirm their letters of credits (L/C). The Bank will guarantee up to 50% of eligible commercial transactions for a maximum amount of USD 50 million. The RPA period will be three years and the maturities of related transactions shall not exceed two years. Commerzbank’s re-engagement in Africa through this new partnership will send strong signals to international banks to confidently resume their trade financing activities on the continent. Thanks to its AAA rating, the Bank will share the African Financial Institution (FI) risk with Commerzbank, and thus participate in expanding Trade Financing (TF) in Africa.

Project Objectives

This Risk Participation Agreement aims to contribute to reducing the trade finance deficit in Africa and promote inclusive diversified economic growth by increasing intra-African trade and strengthening regional integration. The proposed mechanism will contribute to satisfying the growing demand for TF in Africa by supporting trade in crucial economic sectors like agriculture and import/export of fertilizers. It will promote Africa’s industrialization through imports of high value-added equipment and machines.

Beneficiaries

The beneficiaries of this RPA are IBs in Africa whose trade finance activities have been hindered by the insufficient trade confirmation facilities made available by international confirming banks (CB). The final beneficiaries are local African SMEs and businesses, which count on these issuing banks to honour their trade finance commitments. The mechanism providing solid support to FIs and SMEs in Africa. In addition to the knock-on effect, it will foster about USD 750 million worth of trade in intermediate or finished products, raw materials and equipment, thereby boosting economic growth. Over 40 local FIs from 15 RMCs will be supported by this mechanism.

Participating Organization

Funding
African Development Bank

Information

IATI identifier 46002-P-Z1-HAB-059
Last Update 19 Oct 2020

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Contact Details

Email private-sector@afdb.org

Geographic Location

Country Multinational