Medium and Long-Term Guarantee Products

The Afreximbank medium- and long-term guarantee facilities offer export credit support up to 7 years to African entities exporting goods and services within Africa and outside Africa. It also supports the import of capital goods and services including trade-related projects for which the bank can go beyond 7 years on an exceptional basis

The key objectives are:

To enlarge the opportunities for arranging projects and structured trade finance deals in the continent, thereby encouraging trade finance inflows to Africa;
Support African processors to obtain the financing required to expand their operations and thereby promote industrialization and export development in Africa;
To encourage African banks to take the payment risk of their African counterparties;
To enable international banks to take the sovereign risk of African economies;
To permit international banks to lend over longer periods to Africa;
To strengthen African exporters’ position in accessing new markets by covering them against the political and economic risks of those markets; and
To attract investments to the productive and value-added sectors of the African economies.

Products offered under the Bank’s Medium to Long term Guarantee Programme include:

Supplier Credit Guarantee

A Supplier Credit Guarantee is a guarantee to an exporter against the risk of not being paid under an export contract, or, of not being able to recover the costs of performing that contract because of events which prevent its performance or lead to its termination. Under the facility, Afreximbank can provide a guarantee to a bank for a loan to an exporter for the exports of goods and services including capital goods. The guarantee can also cover payments due under tradable instruments such as bills of exchange or promissory notes purchased by a bank from an exporter that is carrying on business in Africa and who has received them in payment for goods and services supplied to the importer.

Risks Covered by Supplier Credit Guarantee
The Supplier Credit Guarantee covers the exporter and/or a bank against both commercial and political risks under the following events:

Foreign buyer fails to make payment of amount due after due date (protracted default);
Foreign buyer becomes insolvent;
Adverse measures are taken by foreign governments;
Local currency amounts are not converted or transferred;
Goods are confiscated due to political circumstances; and
Contract performance becomes impossible due to political circumstances.

Buyer Credit Guarantee

A Buyer Credit Guarantee provides a guarantee to financial institutions against the risk that a loan to an importer for an export contract between an exporter and the importer is not being repaid.

Risks Covered
The Buyers Credit Guarantee covers the exporter against both commercial and political risks under the following events:

Borrower fails to make payment after due date (protracted default);
Borrower becomes insolvent; and
Non-payments due to governments’ policy action.

Project Finance Guarantee

A Project Finance Guarantee is offered mainly to support trade-enabling infrastructure in Africa such as ports, airports, toll roads, power, and telecom, among others. It can also be structured on a case-by-case basis to cover specific project risks such as demand or traffic risk, offtake risk, among others.

Projects of this type often involve high risks due to the uncertainties inherent in the environment, extended time frame of completion, scale of the project or its technologies, among others. In some cases, the risk is so high that banks and other investors are unwilling to invest in the project without a guarantee or some sort of credit enhancement. Afreximbank’s guarantee provides a solution to this problem.

Risks Covered
The Project Finance Guarantee covers the lenders against both commercial and political risks under the following events:

Borrower fails to make payment after due date (protracted default);
Borrower becomes insolvent;
Government policy related measures which adversely affects the projects currency convertibility or transferability;
Breach of commitments; and
This guarantee can also be structured to cover specific project risks such as traffic/demand guarantees in the case of toll-road and other transport sector projects, offtake risk in the case of power sector related projects, among others.

Investment Guarantee

The Investment Guarantee Facility of the Bank covers foreign direct investors against the risk of loss resulting from certain political events in connection with a Foreign Direct Investment (FDI) or investment loans in Africa. It can be used by foreign direct investors or banks financing FDI inflows to Africa.

Risks Covered
The Investment Guarantee covers the foreign direct investor against political risks under the following events:

Government policy related measures which adversely affect the investment including currency convertibility or transferability;
Expropriation or nationalization of the firm in which the investment is made (or of its property) contrary to international law; and
Restrictions on remittances, including exchange controls, imposed by the host state.

ECA- Plus Guarantee

The ECA Plus Guarantee facility is a partnership arrangement where Afreximbank works with other Export Credit Agencies (ECAs) to de-risk African transactions by offering guarantees to support the exports of essential goods and services to Africa. It is an element within the Bank’s ECA Loan Facilitation Programme (ELFP) where the Bank selectively works with ECAs globally to support the acquisition of essential goods for Africa. With the Bank’s ECA Plus cover, Afreximbank indirectly protects the exporter or the financial institution’s claim to repayment via Afreximbank’s co-guarantee, risk participation or a direct guarantee from an ECA. Buyer credit cover protects a financial institution against the risk that a loan to the importer for an export contract between an exporter and the importer is not repaid.

Risks Covered
The ECA-Plus Guarantee covers the exporter against both commercial and political risks under the following events:

Borrower fails to make payment (protracted default);
Borrower becomes insolvent; and
Adverse measures are taken by governments’ leading to non-payment.

Sovereign Obligations Guarantee

The Sovereign Obligation Guarantee protects an international financial or non-financial entity if an African government fails to meet a contractual obligation. It also covers government commitments to project developers, investors and financiers.

Risks Covered
The Sovereign Obligations Guarantee facility covers the risk of non-honouring of sovereign financial obligations.