Millions of dollars pumped into African SMEs

The China Development Bank (CDB) on Monday signed a development-focused agreement to provide the African Export-Import Bank (Afreximbank) with a US$400-million term loan facility to support the financing of small and medium-sized enterprises (SMEs) across Africa.

The agreement, signed by Mr. Tan Jiong, President of CDB, and Prof. Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank, at the Afreximbank Headquarters in Cairo, provides for Afreximbank to deploy the facility to support African SMEs involved in extra- and intra-African trade and those engaged in the productive sectors in Afreximbank Member States.

According to the agreement, the facility, which has a seven-year tenor, will be deployed either directly to eligible African SMEs that meet Afreximbank’s requirements or indirectly through local financial intermediaries.

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Speaking after the signing, Prof. Oramah pointed out that African SMEs continue to struggle to access adequate and affordable financing for growing their businesses and said that the CDB facility would help increase the level of financing available to them.

He added that since Afreximbank was receiving the facility as medium to long-term funding at a relatively affordable pricing, the Bank would transfer the financial advantage in pricing and tenor to the end beneficiaries.

“This facility further strengthens the strategic partnership we have developed with the China Development Bank over the last six years, which has seen CDB make three previous interventions in support of our work at Afreximbank,” President Oramah explained.

“It will also enable our two institutions achieve our respective mandates and developmental outcomes, which include job creation, increased economic activity and increased extra-African trade with China,” Oramah added.

Moody’s credit rating

Meanwhile, the global credit ratings agency Moody’s recently maintained Afreximbank’s rating at Baa1 in its annual credit analysis, with the outlook categorized as stable.

The agency determines its rating for supranationals based on three criteria: capital adequacy, liquidity, and funding and strength of member support.

Moody’s noted that Afreximbank’s credit profile is “supported by its critical role under the African Union umbrella that garners it recurrent capital infusions…alongside the implementation of the African Continental Free Trade Agreement”.

Moreover, the ongoing provision of new capital by the Bank’s member states was cited, because it “gives Afreximbank increased flexibility over its balance sheet to navigate the challenging operating environment amid the economic and financial repercussions of higher inflation and tighter monetary conditions globally”.

Moody’s cited Afreximbank’s credit strengths as being a specialized African trade finance institution with a niche, supporting asset performance as well as having sound profitability and market access at favorable rates.