July 29, 2023

2023-07-28 20:47:00

The African Development Bank (AfDB) recently greenlighted a $70 million risk participation agreement with Morocco’s Banque Centrale Populaire (BCP) to boost foreign trade.

This new agreement, the second of its kind with the BCP, is part of the program entitled “ Risk participation agreement (50/50) for the benefit of the People’s Central Bank of Morocco and comes at a time when regulatory standards for capital and compliance are tightening on the African continent, the AfDB said in a statement.

As a result, international banks have reduced their exposures and the number of their correspondents in Africa. This agreement is therefore an opportunity for the BCP to respond to this challenge by supporting local banks on the continent, which are facing a decrease in funding and confirmation lines from their correspondents.

Thus, the main objective of this agreement is to strengthen the capacity of African banks, as well as that of their customers, mainly small and medium-sized enterprises (SMEs), by consolidating the relationships of trust between the actors of the African banking system. This consolidation will accelerate the development of foreign trade, both regionally and internationally.

Another ambitious objective of this agreement is to help SMEs operating in several African countries to access trade finance instruments. This should support their growth and expansion in the market.

The main direct beneficiaries of this agreement will be African issuing banks, whose trade finance activity is hampered by the lack of trade confirmation lines made available by international confirming banks.

As for the indirect beneficiaries, these are local African SMEs and businesses, which rely on the issuing banks to honor their commitments in terms of trade finance, underlines the AfDB.

The expected benefits of this risk-sharing agreement are significant. The AfDB expects it to meet the growing demand for trade finance from African markets, especially in vital economic sectors such as agriculture, agribusiness, renewable energy, manufacturing, health, telecommunications and services.

In addition, this agreement should contribute to the diversification of production, thus stimulating the creation of jobs and additional tax revenues for several African states. This will strengthen their economic resilience and ensure that commercial banks and African SMEs have stable access to finance for their foreign trade operations, which plays a crucial role as a vehicle for economic growth and regional integration.

In addition, this agreement will concretely support the realization of the African Continental Free Trade Area (AfCFTA), thereby unlocking the continent’s full growth potential and creating new opportunities and jobs.

The BCP, as a Moroccan regional banking group, is present in 18 African countries thanks to its network of banks, in particular the “ Atlantic Bank “. It plays an active role in financing intra-African and international trade.

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