The Bank’s short-term guarantee products aim to promote intra- and extra-African trade.
Through the programme, the bank offers the following products up to 3 years:
- Afreximbank Letter of Credit Confirmation Guarantee Facility;
- Country Risk Guarantee Facility; and
- Letter of Guarantee Facility.
Afreximbank Letter of Credit Confirmation Guarantee Facility
A Letter of Credit Confirmation Guarantee Facility is a line of credit for providing guarantees in favour of confirming banks. Some confirming banks may not be fully comfortable with the credit quality of the African issuing banks and may therefore seek additional comfort through a Letter of Credit confirmation guarantee, or other forms of enhancement such as Irrevocable Reimbursement Undertaking (IRU). This guarantee can also apply to other trade finance instruments such as bills of exchange accepted by African issuing banks, guarantee, standby letter of credit, and promissory notes issued or guaranteed by African banks.
Political and commercial payment risk of international trade transactions.
Country Risk Guarantee Facility (Short term)
The Country Risk Guarantee Facility is aimed at making the country risk more acceptable by transferring that risk to Afreximbank. Under this facility, Afreximbank uses its privileges in member countries including its preferred creditor status by virtue of its ownership by African governments. Afreximbank provides a guarantee to exporters, or international and African banks, with credit exposures to Africa against certain country risk events. The guarantee can be offered directly to the exporter (importer) selling the goods to Africa or to a financial institution providing financing to an African entity.
Political risks, such as:
- Adverse measures taken by governments or policy related events;
- Exchange control related issues including currency convertibility and transfer;
- Moratorium on debt payment; and
- Change in the law or a policy affecting the timing, permits, currency or manner of debt repayment.
Letter of Guarantee Facility (Short term Export Credit)
Under the Letter of Guarantee Facility, the Bank provides credit guarantees to exporters against the risk of them not being paid under a trade contract including export contracts. The facility also provides cover to lenders of most forms of trade debt.
Commercial and political risk:
- The buyer’s failure to pay any amount due under an export contract;
- Borrower fails to make payment after due date (protracted default);
- Buyer or borrower becomes insolvent; and
- Non-convertibility or transferability of currency as a result of government policy.