AfDB Approves $4M Trade Finance Guarantee to Support SMEs and Local Firms in Sierra Leone

New Facility to Boost Trade and Job Creation, Supporting Key Sectors like Agribusiness and Intra-Africa Trade.

The African Development Bank (AfDB) has approved a $4 million trade finance transaction guarantee for Access Bank Sierra Leone Limited (ABSL), aimed at supporting small and medium-sized enterprises (SMEs) and local businesses in Sierra Leone. This guarantee, rated AAA, will provide full coverage for non-payment risks related to ABSL’s trade finance transactions, facilitating the importation of essential consumer goods and promoting regional trade.

The guarantee will cover 100 percent of the non-payment risk taken on by international confirming banks in ABSL’s trade finance activities, which are conducted on behalf of SMEs, local companies, and women-led businesses in Sierra Leone, a transition economy. The facility is expected to support trade worth approximately $36 million over the next three years, with a focus on critical sectors such as agribusiness, including the importation of staple goods like rice, cereals, and cooking oil. The initiative is aligned with the African Continental Free Trade Area (AfCFTA), contributing to the expansion of intra-Africa trade and fostering regional economic integration.

“This facility represents a significant step forward for Sierra Leone’s private sector development,” said Lamin Drammeh, Head of Trade Finance at the African Development Bank. “By addressing the financing gaps faced by SMEs, we are enabling these businesses to actively engage in regional and global trade, which will ultimately lead to job creation and improved livelihoods,” Drammeh added.

Enhancing Access to Finance and Trade in Key Sectors

The $4 million facility will enable ABSL to expand its trade finance offerings, particularly in the agribusiness and intermediate goods sectors. Ganiyu Sanni, Managing Director of ABSL, emphasized that the AAA-rated guarantee will help the bank grow its trade finance portfolio and strengthen Sierra Leone’s position in key value chains. It will particularly enhance the bank's ability to finance critical imports, which are essential to ensuring food security and economic stability in the country.

The Trade Finance Transaction Guarantee, launched by the African Development Bank in 2021, is designed to support local banks across the continent. This guarantee covers a wide range of trade finance instruments, including confirmed letters of credit, trade loans, promissory notes, and irrevocable reimbursement undertakings. By leveraging the Bank's AAA rating, the instrument helps mitigate country risk and the counterparty risks faced by local banks when working with international confirming banks.

The facility is especially tailored to address the challenges faced by local banks in Africa, which often struggle with limited access to credit lines for trade finance, require cash margins for letters of credit, or have exhausted their available lines with correspondent banks. African banks that meet the Bank’s due diligence requirements can access the facility, which also includes 3.5-year trade finance lines of credit to help local banks support both importers and exporters.

Driving Economic Growth and Regional Integration

This initiative is not only crucial for supporting local trade and industry in Sierra Leone but also reinforces the African Development Bank’s ongoing efforts to foster regional integration and economic growth across the continent. By enabling SMEs to access the financing needed to import essential goods and participate in cross-border trade, the bank is contributing to the broader goals of the AfCFTA, which aims to create a single market for goods and services across Africa.

The African Development Bank’s trade finance instruments are key tools in unlocking the potential of Africa’s private sector, promoting sustainable economic development, and enhancing the continent's competitiveness in global trade. Through initiatives like the Trade Finance Transaction Guarantee, the AfDB continues to make strides in facilitating access to finance and encouraging private sector participation in the growth of Africa's trade networks.