Multinational - Risk Participation Agreement (RPA) for Sumitomo Mitsui Banking Corporation Europe Limited (SMBCE)


Project Summary

Approval Date 18 Mar 2020
Signature Date 28 Aug 2022
Sovereign / Non-Sovereign Non Sovereign
Sector Finance
DAC Sector Code 24030
Commitment U.A 76,054,881.2
Status Approved

Project General Description

The proposed project is an unfunded US $100-million Risk Participation Agreement (RPA) for Sumitomo Mitsui Banking Corporation Europe Limited (SMBCE) to support issuing banks in Africa expand their trade finance operations. Indeed, most African banks are small and therefore find it difficult to obtain adequate trade finance facilities from international confirming banks to support African importers and exporters. SMBCE is a commercial bank wholly owned by Sumitomo Mitsui Banking Corporation Group (SMBC) of Japan and was established in March 2003. Its operations concentrate on Middle East, Africa, and Europe with proven specialty in Trade Finance, Project Finance, and Cash Management. SMBCE is consider to be a natural strategic partner for supporting the AfDB’s development mandate, initially starting with this intervention within the trade finance space. The RPA facility is expected to run over three years, as a 50/50 risk sharing arrangement where SMBCE will match AfDB’s undertaking in each transaction, and will create a maximum trade finance portfolio of up to US $200 million at any one time. Counting rollovers, it is expected that the facility will support more than US $1.2 billion of trade in Africa over the 3-year tenor. It aligns with the acute market demand for trade finance in Africa in agriculture, transport, construction, health, energy and manufacturing sectors. AfDB’s additionality lies in the use of its “AAA” credit rating to give greater comfort to SMBCE to take more risk on local banks in Africa and provide them increased trade finance facilities.

Project Objectives

The facility will help address critical market demand for trade finance on the continent by providing support for trade in vital economic sectors such as agriculture and manufacturing. It will also foster financial sector development and regional integration, and contribute to government revenue generation.

Beneficiaries

The implementation of this partnership will support vital sectors such as agriculture, mining, construction and light manufacturing and thus SMBCE’s interventions are multi-sectorial in nature. The proposed facility will therefore enhance SMBCE’s capacity to provide trade confirmation services and liquidity provision to Issuing Banks. It aims also to foster financial sector development, promote south-south trade (spurred by the SMBCE/SMBC Group’s extensive global presence) and engineer inclusive growth by supporting African FIs and SMEs. This will in turn promote intra-Africa trade as well as industrialization and export development.

Participating Organization

Funding
African Development Bank

Information

IATI identifier 46002-P-Z1-HAB-081
Last Update 26 Jan 2023

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Contact Details

Email private-sector@afdb.org

Geographic Location

Country Multinational