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Natasha Chamba, Business Reporter
THE African Development Bank (AfDB) has launched a $US500 million credit insurance scheme aimed at supporting business development across Africa.

The deal will be implemented in partnership with the African Trade Insurance (ATI) Agency, which is a pan-African institution that provides political risk insurance to companies, investors and lenders interested in doing business in Africa and UK reinsurers.

AfDB revealed the multi-million dollar project in a press statement, stating that the credit insurance deal was structured to cover a portion of the Bank’s portfolio of US$2, 3 billion outstanding non-sovereign operations in Africa.

“The African Development Bank (AfDB) and African Trade Insurance Agency (ATI) announce the successful completion of a US$500 million credit insurance deal structured to cover a portion of the Bank’s portfolio of non-sovereign operations in Africa,” said the bank.

“The insurance will cover approximately 22 percent of the Bank’s US$2,3 billion outstanding non-sovereign financial sector portfolio. Specifically, it will protect the Bank against the non-payment of loans made to approximately 30 African financial institutions.

“The portfolio spans the African continent, with exposure to financial institutions in all major regions of the continent, and is expected to release sufficient capital to create almost US$500 million of headroom for new lending.”

AfDB is the premier development finance institution in Africa with a mandate to spur sustainable economic development and social progress in the continent. The bank said the transaction is supposed to have an important demonstration effect to encourage similar institutions to invest more on the continent in the future. AfDB president, Mr Akinwumi Adesina said the deal leverages the bank’s own capital to attain more development in the continent.

“This transaction leverages the bank’s own capital to achieve more development and lending as it creates new pathways for collaboration between private insurers and the bank in the development of the African continent,” he said.

ATI’s chief executive officer Mr George Otieno said the innovation provides a timely solution to the shortage of trade finance that could create a huge impact across the continent.

“With ATI’s insurance guarantees leveraging the balance sheet of AfDB and crowding-in new investments. This innovation provides a timely solution to the scarcity of trade finance that could create enormous impact across the continent.

“ATI’s commitment reflects the US$35 billion worth of trade and investments that we have supported in the past decade, which, thanks to this model, can now be more easily replicated, to the ultimate benefit of Africa,” he said.

At the beginning of the year AfDB, through the African Development Fund, extended a $4,1 million grant to the Zimbabwean Government and part of it was used to reform three State-owned enterprises.

This landmark transaction between AfDB and ATI is one of several recent initiatives undertaken by the Bank under its “Room to Run” programme that responds on the multilateral development banks to explore innovative ways to optimise their balance sheets to achieve the “Billions to Trillions” development agenda. – @queentauruszw.