Dar es Salaam. The Board of Directors of the African Development Bank Group has approved a trade finance transaction guarantee facility for Bank of Africa Tanzania Limited (BOAT) to support Tanzania’s financial sector.
According to a statement released Wednesday, this instrument will support small and medium-sized enterprises (SMEs) and local corporates to facilitate their import and export trade finance requirements.
The facility will also support intra-Africa trade, thus directly contributing to the successful implementation of the African Continental Free Trade Area (AfCFTA) agenda.
The Bank will provide a guarantee to confirming banks for the non-payment risk arising from the confirmation of letters of credit and similar trade finance instruments issued by BOAT.
According to AfDB, a lack of adequate credit lines from international confirming banks has hampered BOAT’s ability to support its clients. The facility will support the importation of critical inputs such as fertiliser, pharmaceuticals, solar energy panels, farm machinery and other intermediate goods needed by Tanzania to revive its agriculture and manufacturing sectors.
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Speaking soon after the approval, AfDB Country Manager for Tanzania, Patricia Laverley, said the bank was “excited” to finalise this trade finance transaction guarantee facility to BOAT that is intended to support small businesses by facilitating their import and export trade finance needs.
“This facility is aligned with Tanzania’s 2021-25 Strategy Paper priority area on improving the private sector business environment for job creation, and it reiterates the Bank’s commitment to developing the private sector by supporting the financial sector,” she added.
AfDB states that stringent regulatory and capital requirements and Know Your Customer compliance enforcement have caused many global banks to reduce their correspondent banking relationships in Africa, while some are exiting the market altogether.
There is, therefore, an urgent need for financing to re-energise Africa’s trade, which requires more participation from institutions like the AfDB, the bank noted.
Samir Yassine, BOAT’s Deputy Managing Director of Commercials, said the bank was “delighted” to secure the Transaction Guarantee Facility from AfDB.
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“This strategic collaboration is poised to unlock new opportunities for businesses, entrepreneurs, and various stakeholders, enabling them to access financial resources crucial for their growth and expansion with a strategic focus on the SME segment,” he said.
“Bank of Africa Tanzania Limited remains committed to its mission to provide innovative financial solutions and facilitate trade transactions that contribute to Tanzania’s economic progress,” Mr Yassine added.
