African Development Bank Approves $40 Million Trade Finance Transaction Guarantee Facility To Dashen Bank

The Board of Directors of the African Development Bank Group has approved a $40 million transaction guarantee facility to support Dashen Bank’s trade finance activities in Ethiopia.

The Facility will provide support to Small and Medium Sized Enterprises (SMEs) and local corporates’ import and export trade finance requirements. It will also support intra-Africa trade, thus directly contributing to the successful implementation of the African Continental Free Trade Area (AfCFTA) agenda.

The Bank Group will provide a guarantee of up to 100 percent to confirming banks for the non-payment risk arising from the confirmation of Letters of Credit and similar trade finance instruments issued by Dashen Bank.

Following the approval, the African Development Bank’s Director General for East Africa, Nnenna Nwabufo said: “Supporting Trade in Africa is a key priority at the African Development Bank. Trade finance is an important driver of economic growth and is critical for cross-border trade, particularly in emerging markets. We are delighted to work with Dashen, a strong partner with extensive knowledge and network in Ethiopia, on a shared ambition to support the region’s Trade.”

Reacting to news about the approval, Asfaw Alemu CEO of Dashen Bank, said: “After fulfilling the stringent due diligence requirements of the African Development Bank, we are so delighted that its Board of Directors has approved a trade finance transaction guarantee facility of $40 million. This much-needed guarantee facility will be instrumental in expanding our bank’s trade services across the region and beyond.”

He added: “The best practices learned through our engagement and the due diligence exercise passed with the continent’s premier development financier has been invaluable in pursuit of Dashen Bank’s strategic aspirations to be a best-in-class bank in Africa. We look forward to further strengthening our partnership and benefiting more from the resources and extensive capabilities of the African Development Bank and its partners, as we endeavor to support Ethiopia’s thriving small and medium enterprises in productive economic sectors, including agriculture and manufacturing.”

The  African Development Bank’s Transaction Guarantee Product is an unfunded instrument that provides up to 100 percent non-payment risk cover to confirming Banks for trade finance transactions of eligible Africa-based Issuing Banks. By covering up to 100 percent non-payment risk, the transaction guarantee will enable the Bank Group to support local African banks operating in the continent, particularly in low-income countries and transition states.