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The International Finance Corporation (IFC) and Deutsche Bank have announced a risk-sharing facility of up to €215mn targeting importers and exporters of essential goods in Africa.

The partnership will initially cover risk for a portfolio of trade transactions originated by Deutsche Bank with 40 issuing banks across 18 African countries, 14 of which are classified by the World Bank Group as small, fragile and/or conflict affected. The IFC will take up to 75% of Deutsche Bank’s risk, which a spokesperson for the corporation says is in line with its agenda in the highest risk markets in Africa.

The IFC anticipates that this facility will encourage more financial institutions to offer trade finance on the continent, with the spokesperson telling GTR: “Deteriorated macro environments and downgraded country ratings, combined with regulatory rules, have made it very difficult for international correspondent banks to finance trade and serve issuing banks in many African countries – even if the individual financial institutions may be well-performing. Hence, the need to find solutions to risk share.

“The objective of us taking 75% of risk is to maintain some activity of confirming banks in Africa. We are doing this because we want them to stay in Sub-Saharan Africa, despite the difficult context.”

The project is a global trade liquidity programme facility under the IFC’s Africa trade and supply chain recovery initiative, a US$1bn scheme that began financing initiatives in July 2022, and the first to be supported by the International Development Association’s private sector window blended finance facility.

According to the IFC, African countries imported and exported US$1.1tn of goods and services in 2022, equivalent to 54% of the continent’s GDP. However, the trade finance gap on the continent is only growing and was estimated to be as large as US$120bn in 2023. The IFC hopes the deal will also help countries adapt to climate change and strengthen food security.

In April, Citi and British International Investment launched a US$100mn risk-sharing facility to finance imports of essential commodities including wheat, fertiliser and rice.