1. Line of Credit Program
The Bank provides funded and unfunded credit lines through the Line of Credit Program (LOCP) to creditworthy African and non-African banks active in African trade finance and designated as the Bank’s Trade Finance Intermediaries (TFIs). The LOCP is an instrument through which the Bank provides loan and guarantee facilities through intermediary banks to small- and medium-sized trading entities whose balance sheet size and trade turnover would not normally qualify them for the Bank’s direct lending. The facilities provided under the LOCP include the Trade Finance (Export-Import) Facility, Pre- and Post-Export Financing Facility, Letter of Credit Confirmation and Refinancing Facility, and Reimbursement Guarantee Facility.
- Central banks;
- Commercial banks;
- Finance companies;
- Export houses;
- Institutions active in trade finance in Africa; and
- Similar institutions in non-Participating states of the Bank (for financing of imports from participating states).
720 days but extendable.
Linked to the Libor and related to the country risk, transaction risk and market Conditions.
This may include a Facility Agreement, Security Assignment Deed, Legal Opinions, etc.
1.1 Pre- and post-export financing facility through which the Bank provides export financing to Eligible Entities. The Bank may finance up to 75% and 80% of the underlying sales contract for pre-export and post-export transactions respectively.
1.2 Letter of Credit Confirmation and refinancing facility through which the Bank confirms and/or refinances sight and usance Letters of Credit covering Eligible Items.
1.3 Export Credit Guarantee Facility through which the Bank provides credit guarantee in support of exporting corporates to enable them to obtain competitively priced export finance facilities. Under the facility, the Bank may also provide guarantees in support of African banks seeking export finance Lines of Credit from international banks. The Bank may guarantee up to 100% of the credit exposure to the guaranteed entity.
1.4 Reimbursement Guarantee Facility which is used by the Bank to enable African and non-African banks to take the credit risk of Eligible Banks, being banks that satisfy Afreximbank’s Risk Acceptance Criteria and are granted unadvised Lines of Credit by the Bank under its Universal Lines of Credit (UNLOCS) Initiative. In this regard, the Bank issues a guarantee covering the payment risk of African and non-African banks under Letters of Credit or other acceptable trade debt instruments. Under the facility, banks confirming Letters of Credit issued by Eligible Banks may approach the Bank to provide a reimbursement guarantee to be called in the event of non-payment by the Letter of Credit issuing bank. This facility is to help African banks to issue Letters of Credit without the need for cash collateral and at reasonable cost. It also helps African banks to accept Letters of Credit issued by banks that they are not familiar with, without requesting the confirmation of such Letters of Credit. It therefore facilitates intra-African trade and trade with the growing new markets of the BRICs (Brazil, Russia, India and China).
1.5 Correspondent Banking/African Letter of Credit Facility under which the Bank:
(a). Offers correspondent banking services to African banks assisting them to make payments and collections around the world, with particular emphasis on Africa; and
(b). Offers dedicated Letter of Credit Confirmation Facilities for the promotion of intra-African trade. This facility is hinged on the extensive experience that the Bank has gained across Africa through the use of African banks as TFIs.
2. Direct Financing Program
Under the Direct Financing Program, the Bank provides pre- and post-export financing directly to corporates with balance sheet size of at least US$2 million and an annual trade turnover of at least US$10 million.
- Large corporates operating in Africa as exporters and/or importers.
- Large corporates importing Eligible Goods from African countries.
Available Facilities under the Program:
- Pre- and post-export financing (up to 75% and 80% of the underlying sales contract for pre-export and post-export transactions respectively);
- Import Financing (Letter of Credit Issuance) Facility (up to 70% of the underlying sales contract); and
- Export Credit Guarantee (up to 100%). This may be granted to a corporate for possible assignment to local and other lenders thereby expanding the access of these entities to trade financing.
Linked to the Libor and related to the country risk, transaction risk and market conditions.
3. Syndications Program
The Syndications Program is a risk-sharing program used by the Bank to leverage international financing in support of trade- and project-related activities across the continent. Under this program, the Bank arranges or joins a syndicate or club of reputable international and/or African banks to provide financing to African entities.
To leverage international financing into Africa by sharing the risks of such transactions with other banks and financial institutions.
Central banks, commercial banks, finance companies, export houses, African and non-African corporates engaged in Eligible Transactions.
Up to 7 years depending on the transaction.
Linked to the Libor and related to the country risk, transaction risk and market conditions.
The syndicates the Bank participates in must be providing those facilities that fall within the Bank’s mandate and may cover the broad areas of export-, import- and project-related financing.
Special Features of the Program:
Under the syndications which the Bank arranges or participates in, lending may be made based on a single Loan Agreement between Afreximbank and the borrower and a Participation Agreement between the Bank and each participant in the syndicate. The participation of other banks is, however, usually fully disclosed. Through this mechanism, the commercial risks in the transaction are shared fully by the Bank and the participants, but the participants also benefit from the tax and country risk privileges that the Bank derives from its preferred creditor status under the Agreement among Participating States of the Bank. The Bank may join in co-financing with local banks, in which case, the Bank provides the foreign currency requirements of a transaction while the local banks provide the local currency component. The Bank usually shares the security interests with the local banks. Through this mechanism, the Bank aims at deepening the activity of local banks in export financing while at the same time alleviating the foreign exchange constraints to exporting activities in member countries.
4. Special Risks Program
The Special Risks Program (SRP) is designed to provide comfort to lenders, extending facilities to African sovereigns, banks, and corporates by transferring some of the financing risks not normally amenable to market solutions, to the Bank’s credit risk.
This program is conceived as a risk-bearing program through which the Bank aims to achieve the following strategic objectives:
- To enlarge the opportunities for arranging structured trade finance deals in the continent, thereby encouraging trade finance inflows to Africa;
- Encouraging African banks to take the payment risk of their African counterparties. Also, to enable international banks to take the sovereign risk of African economies;
- To permit international banks to lend over periods longer than 360 days to Africa; and
- To strengthen African exporters’ position in accessing new markets by covering them against the political and economic risks of those markets.
The following two facilities are provided under the Program:
4.1 Country Risk Guarantee Facility
The Country Risk Guarantee Facility is aimed at making the sovereign risk of African countries more acceptable by transferring this risk to Afreximbank as credit risk. Under this program, Afreximbank guarantees international and African banks with credit exposures to Africa against certain country risk events.
- To facilitate the trading of Africa’s trade debts;
- To share risk with banks financing African trade, or credit insurance companies providing cover against African trade payment risks;
- To cover financing banks where the African country risk is found unacceptable;
- To reduce the stringent requirements for lending to Africa; and
- To enhance the credit of African borrowers.
- Insurance and other institutions active in trade finance in Africa; and
- Holders of African trade debt papers. The holder of the paper is guaranteed that at maturity it will be reimbursed in the event of certain country risk events occurring.
Up to 7 years.
Bank, trade credit and project loans including contingent obligations. Old (existing or previously contracted) debt and commercial credits would not qualify.
Coverage is for up to 100% of the lender’s exposure with respect to specific country risk events, namely:
- Exchange control regulation;
- Retroactive imposition of export and/or import restrictions;
- Moratorium on debt payment; and
- Change in law or policy affecting the timing, currency or manner of debt repayment.
Afreximbank Comparative Advantage in providing the Guarantee:
- Afreximbank is an international financial institution and is not subject to controls in any of its Participating States. Thus, the credit risk of the Bank is the only consideration in determining any exposure to Afreximbank;
- The Bank is partly owned by African countries who are signatories to the Bank Agreement. Under the Agreement, the Bank’s property, assets and operations are free from restrictions, regulations, supervisions, controls, moratoria, and other executive, administrative, fiscal and monetary restrictions of any nature in each Participating State (Article IX of Afreximbank Agreement). Thus, Afreximbank enjoys preferred creditor status in member countries (similar to that enjoyed by the World Bank, African Development Bank, and some other multilateral organisations).
To African Traders: Eases access to credit with better conditions.
To Lending Banks: Brings more comfort to grant more competitive terms, and to be more active in trade finance in Africa.
A guarantee fee related to the assessed country risk.
- Guarantee Agreement; and
- Legal Opinions.
4.2 Investment Guarantee Facility
The Bank offers Investment Guarantees to cover Foreign Direct Investment (FDI) inflows into Africa. It is offered to country funds, FDI providers in trade-promoting ventures, investors in Construction, Design and Management (CDM) projects that are likely to generate carbon credits, investors undertaking Build Operate and Transfer (BOT)-type projects in Africa, and similar deals. Under this facility, investors in eligible projects are protected against the risk of expropriation of dividends and other specified government action that may hinder the investor from normal operation, repatriation of profit etc.
The guarantee may be for a fixed term of 5 years but may be renewed.
The Bank charges guarantee fees dependent on the market conditions then prevailing.
5. Financial Future-Flow Pre-Financing Program
Financial future-flow transactions refer to future-flow debt offerings that rely, for their repayment, upon receivables not generated from the export of physical goods. These receivables include, among others, credit card or cheque receivables, tourism receivables, migrant remittances, royalties arising from Bilateral Air Services Agreements (BASA), overflight fees, and fishing royalties etc. Future flows debt offerings provide flexibility in financing difficult transactions, especially when other forms of collateral are not easily available. Afreximbank uses this instrument in financing projects that do not themselves have sufficient receivables to support any borrowing.
This is a financial product intended to assist African governments and/or banks with significant remittance receipts, and other future financial flows, such as credit cards, fishing royalties, over flight fees etc., to access reasonably priced external trade and project financing from the international credit markets using those flows as the sources of repayment.
The Program is intended to benefit the following:
- African governments and/or their agencies; and
- African banks with significant remittance and credit-card business as well as trade finance payment rights.
Eligible Financial Future Flows:
- International money transfers;
- Credit card flows;
- Over flight fees, fishing royalties and similar flows; and
- Trade finance payment rights.
Eligible money transfer companies are those that meet the Know-Your-Customer (KYC) and Anti-Money Laundering (AML) standards of the Bank.
Information to be Supplied:
Applicants are required to supply, amongst other documents, details of the financial future flow receipts for the immediate past 3 years.
Linked to LIBOR and related to the country risks, transaction risks and market conditions, and relevant fees. Pricing is competitive and is driven by market practice and the Bank’s cost of funds.
6. Local Currency Program
The Local Currency Program serves as an important trade facilitation function as it helps the Bank to provide matching currency to its clients’ needs, for example, providing working capital financing for the purchase of local inputs for export manufacturing. Also, in a number of sub-regions operating or planning to introduce currency areas, the local currency program helps promote intra-regional trade.
Instruments used in the program’s delivery include loans and guarantees, as described below:
6.1 Counter-Party Risk Guarantee Facility related to Forward Exchange Contracts
One of the reasons why import financing by international banks to African entities has been rare is because the lending banks face local currency risks. This is because the imports are paid for in local currency which must then be converted into hard currency to meet the repayment of such facilities. Accordingly, international banks generally require hard currency cash collateral before they will open or confirm letters of credit for African entities, even when they are in a position to take the country risk or where they can purchase country risk cover in the market.
It is obvious that were there to be an active forward market for hedging African currency risks, this cash collateral requirement would be reduced. The existence of an active forward market for a number of African currencies is difficult due to few participants because of high counter-party risk. Further, African exporters face currency risks when they finance their operations with local currency and receive hard currencies as export proceeds.
The purpose of this facility is to mitigate these risks by guaranteeing the forward delivery performance of Eligible Beneficiaries, which widens the scope for trading in African currencies.
Eligible Currency Forwards covering trade and related transactions in Eligible Items.
- Failure of an Eligible Beneficiary to deliver US dollars or Euro on a future date as agreed with a hedge counter-party; and
- Failure of an Eligible Beneficiary to deliver local currency on an agreed future date.
- Trade finance banks.
- Corporates engaged in trade. Such corporates must have a minimum capital base of US$2 million, and minimum turnover of US$10 million per annum;
- Market-makers in Eligible African currency trading; and
- Finance companies and investors in African trade debt papers and/or export related projects.
The future delivery obligations guaranteed will normally not exceed 360 days.
- Future delivery of US dollars or Euros in exchange for Eligible African Currency; and
- Future delivery of Eligible African currency in exchange for US dollars or Euros.
- National currencies of Participating States as from time to time determined by the Bank;
- United States Dollars; and
- It assists exporters who funded their operations through local borrowing to hedge against exchange rate fluctuations;
- It helps export manufacturers to source raw materials locally since the hedge will ensure that the funding used in making such purchases can be insulated from currency mis-match;
- It helps African importers and banks to access international financing for imports; and
- Access of private investors to international import financing helps the governments cushion pressures on their currencies.
Stand-by Letters of Credits or other acceptable instruments of guarantee.
- Foreign Exchange Forward Contract;
- Guarantee Instrument; and
- Legal Opinions.
Extent of Cover:
100% of the face value of the Forward Contract.
A guarantee fee related to the credit risk involved.
6.2 Local Currency Loan Facilities
Local Currency Loan Facilities are provided through existing programs and facilities but in Local Currencies.
The Programs are:
- Lines of Credit to Banks
- Direct Financing Program