The News
The UK’s development finance institution, British International Investment (BII), agreed a $50 million deal with Ghana International Bank (GHIB) to boost trade in seven African countries.
The agreement — which will see GHIB lend to businesses through local banks in Sierra Leone, Liberia, The Gambia, Benin, DR Congo, Rwanda, and Tanzania — aims to expand access to finance in frontier markets where firms lack the backing of global banks due to perceived credit risks, officials from BII and GHIB told Semafor.
The new partnership aims to deploy capital for the “biggest impact” by helping local businesses import the commodities and equipment needed to scale their businesses and increase trade, Kwabena Asante-Poku, BII’s country director for Ghana, said. Efforts to increase trade volumes will create jobs and spur economic growth through the “multiplier effect,” GHIB CEO Dean Adansi added.
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Africa faces a trade finance deficit of up to $120 billion, according to the International Trade and Forfaiting Association. The gap represents the shortfall between the demand and supply for trade finance on the continent.
Adansi — whose bank is headquartered in London despite being owned by Ghanaian financial institutions — said there was an urgent need to counteract the risk premium associated with Africa, particularly because cuts expected in Washington’s Development Finance Corporation (DFC) under US President Donald Trump’s administration were likely to have a “harmful” impact.
“There isn’t enough capital locally to support the commercial opportunities that arise over time, and the DFIs [development finance institutions] have been a huge financial support base for financial institutions,” he said.
BII officials said GHIB would work with around 25 local banks in the target countries and the program was expected to last three years.
Step Back
Africa’s trade deficit most acutely affects small and medium-sized enterprises, the ones with the lowest access to the credit needed to trade.
Several international banks have withdrawn from African markets in recent years — citing low profitability, high risk, and economic shocks — further reducing access to financial services. Standard Chartered Bank, for example, left Angola, Cameroon, Gambia, Sierra Leone, and Zimbabwe in 2022. And Barclays has reduced its presence on the continent since 2017.
Notable
- The Development Reimagined think tank scrutinizes “systemic flaws” in the international financial architecture in a new report, saying they create inaccurate perceptions of risk in African credit ratings.