By JUDITH NAMUTOWE –
THE African Development Bank (AfDB) has approved an unfunded US$100-million Risk Participation Agreement (RPA) for Sumitomo Mitsui Banking Corporation Europe  (SMBCE)  Limited  to support issuing banks in Africa expand their trade finance operations.
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, this is contained in a statement issue by AfDB in Lusaka yesterday.
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 create a maximum trade finance portfolio of up to $200 million at any one time.
Counting rollovers, it was expected that the facility would support more than $1.2 billion of trade in Africa over the 3-year tenor.
Presenting the project to the board of directors,  the Bank’s financial sector development director, Stefan Nalletamby said AfDB considers SMBCE to be a natural strategic partner for supporting the
its development mandate.
“Initially, starting with this intervention within the trade finance space, going forward, we foresee a huge opportunity to build on this solid foundation by extending our partnership with SMBCE to other
sector operations of the bank in areas such as energy, agribusiness and infrastructure in the medium term.
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.
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,” she said.
This will be the AfDB’s first RPA with a major Japanese financial institution, which in itself is a strategic milestone in the history of the Trade Finance Programme.
SMBCE is a major player in the global trade finance market with significant presence in many emerging markets and is well positioned to support South-south  trade involving Africa.