The Facility aims to support the import and export trade finance needs of Small and Medium-sized Enterprises (SMEs) and local corporations.
The Board of Directors of the African Development Bank Group has sanctioned a transaction guarantee facility amounting to $40 million to bolster Dashen Bank’s trade finance operations in Ethiopia.
This facility aims to assist Small and Medium-Sized Enterprises (SMEs) and local corporations with their import and export trade finance needs. Additionally, it will promote intra-African trade, thereby playing a significant role in the effective execution of the African Continental Free Trade Area (AfCFTA) initiative.
The Bank Group will extend a guarantee of up to 100 percent to confirming banks to mitigate the non-payment risk associated with the confirmation of Letters of Credit and other similar trade finance instruments issued by Dashen Bank.
In response to the approval, Nnenna Nwabufo, the African Development Bank’s Director General for East Africa, remarked: “Facilitating trade in Africa is a fundamental priority for the African Development Bank. Trade finance serves as a vital catalyst for economic development and is essential for cross-border trade, especially in emerging markets. We are pleased to collaborate with Dashen, a robust partner with significant expertise and connections in Ethiopia, to achieve our mutual goal of enhancing regional trade.”
Commenting on the approval, Asfaw Alemu, CEO of Dashen Bank, stated: “Having met the rigorous due diligence standards set by the African Development Bank, we are thrilled that its Board of Directors has authorized a $40 million trade finance transaction guarantee facility. This essential guarantee will play a crucial role in broadening our bank’s trade services throughout the region and beyond.”
He remarked that the insights gained from our collaboration and the due diligence process conducted with the continent's leading development financier have proven to be essential in advancing Dashen Bank's strategic goal of becoming a top-tier bank in Africa. We anticipate further enhancing our partnership and reaping greater benefits from the resources and extensive expertise of the African Development Bank and its affiliates, as we strive to assist Ethiopia's flourishing small and medium enterprises in key economic sectors, such as agriculture and manufacturing.
The African Development Bank’s Transaction Guarantee Product is an unfunded instrument that offers up to 100 percent non-payment risk coverage to confirming banks for trade finance transactions involving eligible Africa-based issuing banks. By providing this level of non-payment risk coverage, the transaction guarantee will empower the Bank Group to support local African banks across the continent, especially in low-income countries and transitional states.