The intermediary directive of National Bank of Ethiopia (NBE) bears fruits for banks. Ethiopia announces that it expects further fund from the supranational financial institution, African Export-Import Bank (Afreximbank), which this week disclosed the allocation of half a billion dollar for all commercial banks through Afreximbank Trade Facilitation (AfTRAF) Programme. In related with the roadshow event that was held for three days starting from Wednesday September 15, Afreximbank announced that it has allocated for all commercial banks including private banks to facilitate USD 500 million to boost their activity on the international trade with their customers.
It is the first time in the history of Afreximbank, which commenced operations in 1993 and based in Cairo, to make funds available for private banks in Ethiopia.
Rene Awambeng, Global Head, Client Relations, Afreximbank, commended the tremendous effort and transformative measures, which are impacting Ethiopia’s financial sector development the macroeconomic stability of the country, the growth and the foreign exchange management, “despite the external shocks and internal challenges, including the emergence of the pandemic catastrophe, the financial services sector in Ethiopia remains quite resilient and its position to grow in the right direction with the slowdown of the pandemic.”
In the past couple of years, NBE has introduced massive changes in the financial industry that would pave the way for the country on the process to join World Trade Organization (WTO) and support for doing business in the country beside direct support for commercial banks to engage on massive activities including to access finance from foreign sources as intermediary for their local customers.
Regarding the latest allocation of half a billion dollar, despite him not mentioning the name of the firm he stated that one bank has already enjoyed over 200 million dollars of this facility, “so this new facility comes to improve and increase amounts. The facility approval is expected to be complete by the end of September and in the last quarter, banks should begin enjoying the benefit of this facility that trade finance programs,” he explained.
Ethiopia is one of the founding members and the shareholder of the bank, through NBE, Commercial Bank of Ethiopia (CBE) and Ethiopian Insurance Corporation.
“However, we have not seen a significant comparison in the size of the support of the Afreximbank, to the Ethiopian economy over these last years; and this is one of the reasons, why we want to address the situation by having this road show with the financial sector and looking at intermediation with the financial sector so that we can improve the support of the bank to you as intermediaries and consequently to the small and medium-sized companies to the large corporates, and to the public sector in the Ethiopian economy,” Awambeng says, adding, “We are not here to compete with financial institutions. We are here to complement financial institutions. Our work is not principally driven by profit. Our work is driven by development and impact. We need to show a difference. If a commercial banks in Ethiopia is capable of doing a transaction. There is no need to interfere, we’re not going to come and take customer or displace that client from the Afreximbank.” he added.
Yinager Dessie, Governor of National Bank of Ethiopia (NBE) told Capital that his government is expecting more similar facilities from the continental trade bank to support Ethiopian business.
He said that the bank has provided some support for Ethiopia but it was not that much “I have told them (the continental trade financer) to improve their facility for Ethiopian financial sector.”
Awambeng recalled that Ethiopia benefited about USD one billion from the bank mainly through the state owned bank.
It was recalled that about a year ago NBE approved a directive ‘Foreign Currency Intermediation by Banks Directives No. SBB/77/2020’ that allow local private banks to play intermediary role to access loan from foreign sources to granting credit to local borrowers in foreign currency. The current instrument facilitated by Afreximbank is part of the latest move NBE, which allows banks to improve LC settlement and payment of banks.
Yinager said that the NBE directive help banks to access such kind of funds from foreign sources that was not impossible before.
The Governor furthermore emphasized that the bank ought to open its office in Ethiopia as other international financial organizations on the aim to accelerate the benefit of the country.
Afreximbank stated that though the Bank’s Ethiopian interventions have traditionally been executed through its relationship with the country’s largest financial institution, CBE with whom it has existing facilities as well as an operating AfTRAF programme Afreximbank aims to develop strong partnerships with all commercial banks in Ethiopia, and is actively pursuing its target of signing up, and providing the AfTRAF Programme to 10 other commercial banks in Ethiopia by the end of 2021.
The Global Head has also introduced different financing instruments that Ethiopian banks shall utilize on their operation with customers.
“We also have project and asset based financing to support your growing industry. Such as the tourism sector, the medical sector the airline sector, the beverage sector, which are booming sectors in the economy,” he explained.
Awambeng said “commercial banks play an important role in facilitating and promoting trade a core ingredient of economic growth. Today’s forum serves to demonstrate the Bank’s commitment to support Ethiopia’s efforts to expand its trade capacity and establish the knowledge, infrastructure and resources by which this will be achieved.”
Under the roadshow representatives from the commercial banks received in-depth training in trade finance from Afreximbank, as part of its ambitious capacity-building exercise in the country.
According to the statement of Afreximbank the forum took place in the context of far-reaching reforms undertaken by the government of Ethiopia to open up its economy for the participation of the private sector.
It added that central to this economic liberalization, it is the work of the National Bank of Ethiopia to reform the country’s banking sector. These changes are expected to strengthen the capacity of Ethiopian institutions, including commercial banks, to accelerate the development of the Ethiopian economy through trade and investments. The reforms are also expected to increase Ethiopian trade with Africa and the rest of the world.
The continents commercial banks actually account for about 60 percent of Afreximbank financing as they are intermediaries to be able to extend support to public, private sector and local financial institutions.
There are currently 51 participating member countries in the African export-import bank group and family, and only Libya, Algeria and Somalia have not ratified the establishment agreement of the bank.
At the end of 2020, the Bank’s total assets and guarantees stood at USD 21.5 billion, and its shareholder funds amounted to USD 3.4 billion. Afreximbank disbursed more than USD 42 billion between 2016 and 2020.
Besides it’s headquarter in Cairo it has offices in Abidjan-Côte D’Ivoire, Abuja- Nigeria, Harare-Zimbabwe, Kampala-Uganda and next week it will open in Yaoundé-Cameroon for central Africa regional office.
He assured that Addis will host a representative office of Afreximbank in the next five years time.
AfTRAF Programme incorporates various products devised to increase intra-extra African trade volumes, diversify the character of this trade, and assure the confidence of trade partners in the settlement of international trade transactions for critical imports into Africa. Specifically, the programme is designed to enable and escalate trade activities and investments through, among other measures: the provision of bank-to-bank Reimbursement Undertaking facilities; issuances of promissory notes and bills of exchange aval facilities; issuances of bonds, guarantees and indemnities (BGI) facilities; and issuances of trade confirmation guarantee facilities.
The bank leaders have also introduced the MANSA, a pan-African customer due diligence repository for financial institutions, corporate entities and SMEs, developed to address the perceived risk of doing business in Africa and with Africans, for bankers to use it, which was launched by the continental bank about ten months ago. It was launched to ease banks’ engagement with global partners.
MANSA is a single source of the primary data required for Customer Due Diligence (CDD) and Know Your Customer (KYC) checks on African entities, including financial institutions, corporates and SMEs, in accordance with best practices.
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