he African Development Bank (AfDB) says it is keen on extending about $30 million (about K30.1 billion) worth of trade finance guarantees to the country’s major financial players over the next few months.
This follows the conclusion of a visit to Malawi by the African Development Bank Group’s Financial Sector Development Department officials to strengthen engagement with the private sector and financial institutions.
In a statement, AfDB country manager for Malawi, Macmillan Anyanwu, said they engaged senior executives of several local financial institutions in Lilongwe and Blantyre to establish points of entry for the pan-African bank to support Malawi’s financial sector.
“Engagements like these, between the bank and Malawi’s private and financial sector, are critical in ensuring that the country is fully aware of all instruments available to it to strengthen the private sector as an engine of inclusive growth necessary to lift more of its people out of poverty,” he said.
AfDB director for financial sector development, Stefan Nalletamby, said they are excited to introduce an array of non-sovereign tools that Malawian private sector entities can access to grow their business.
“Instruments such as the transaction guarantee offer the bank flexibility to use our strong AAA-rated risk-bearing capacity to increase access to trade finance and boost intra/extra African trade in our regional member countries like Malawi,” he said.
Bankers Association of Malawi chief executive officer Lyness Nkungula could not immediately comment on how banks will leverage this opportunity.
But a financial market analyst Bond Mtembezeka in an interview yesterday commended AfDB for its proactive approach to support the country’s financial sector.
He said the guarantees provide an opportunity for financial sector players to not only extend their scope of business as they will be able to take on riskier businesses locally, but also strengthen their relationships with other players globally.
Mtembezeka said: “I think the main challenge with the country’s financial sector in that regard is that it is still a relatively unsophisticated market with greater risk aversion.
“But I think we need to move away from doing business the traditional way, always and embrace and take advantage of the new opportunities out there.”
While in the country, the AfDB team made presentations to a selected group of private sector officials to raise awareness of the bank’s major non-sovereign instruments and to introduce its newly launched trade finance transaction guarantee instruments to the Malawian market.
The guarantee is specifically designed to provide up to 100 percent cover for non-payment risk to regional and international banks for trade transactions initiated by local banks in various African countries.
Among the wide array of trade finance instruments eligible for cover are confirmed letters of credit, trade loans, irrevocable reimbursement undertakings, avalised bills and promissory notes.