Credit insurance, export credit and funds: How do we solve the African trade finance gap?
AIRED ON 10 July 2023 – 7:00 EST / 12:00 BST / 13:00 CET / 19:00 SGT
Presented by Trade Finance Global and Tinubu
Missed the Live Tradecast? Watch on YouTube
Trade Finance Global and Tinubu hosted a webinar exploring the challenges and opportunities for the African credit insurance industry. While the African market is very promising, it has been ignored by many major economies. However, there are signs of market shifts, with intra-African trade increasing after the expansion of the AfCTFA, and the work of multilaterals and international financial institutions.
Although there are signs of new and expanded market opportunities, to create a sustainable and successful trade credit insurance industry, there are many questions that need to be discussed, and much collaboration is needed.
This Tradecast aims to bring together leaders from the public and private sectors, to discuss how to expand an open, sustainable, and successful trade credit insurance market in the African continent.
The tradecast touched on:
- Brief overview of private/public trade finance and credit insurance landscape across Africa
- Geopolitical and macroeconomic and sovereign debt/defaults overview and how this impacts the credit insurance landscape in Africa – deep dive into MENA, West, East and South Africa
- Opportunities in the African continent (including AfCFTA): the untapped market for new investors.
- How could new technology improve opportunities?
- Access to finance and liquidity in the market: how to increase capital in Africa – a multistakeholder approach
- The business case for the creation of new ECA’s in Africa, as well as exploring opportunities credit insurance
- Local development: how African finance players can emerge to help support intra-African trade, SMEs and boost growth at a grassroots level
- What are sustainable ways for increased external investment? How to avoid the trap of external stakeholders over-imposing themselves on regional actors/countries?
- Governance: role of national governments and multilaterals in supporting African trade.
Streamed on LinkedIn Live
- Introduction to the Panel
- Adedayo Adesanmi, Transactor/Specialist Energy & Infrastructure, Trade Finance,Standard Bank
- Shuichi Hayashida, Head of West and Central Africa, MIGA
- Jérôme Pezé, Chief Executive Officer and Founder, Tinubu
- George RR Wilson, Head Institutional Trade Finance, Investec
- Richard Wulff, Executive Director, ICISA
- What causes the African trade finance gap? (Discuss domestic, regional, and deep sea nuances)
- Can trade credit insurance help African companies access finance? How does it derisk transactions for corporate buyers and enable trade credit in Africa?
- What are the main barriers for local banks providing trade finance to MSMEs? How does this differ from other markets?
- How can we address the African trade finance gap? What challenges do they face and what are the nuances?
- Should we approach this problem regionally or through governments, sub-sovereign entities, and financial institutions? How do we tackle local currency and USD clearing/liquidity issues?
- Could you give a brief explanation of the World Trade Board’s “Financial Inclusion of Trade” pillars with regards to fixing the African trade finance problem?
- How can the implementation of digital tools, specifically tools like e-invoicing and digital legal entity identifiers, contribute to improving financial inclusion in trade, especially for African SMEs?
- What tools could be used to help understand the use of proceeds and flow of funds, and how will this help increase the market for African trade?
- Has the adoption of these technologies helped increase access to trade finance, or is the adoption still too slow to make a noticeable change?
Legal and Regulatory Infrastructure
- Will the AfCFTA, the African Continental Free Trade Area, make a significant impact in advancing access to capital and flow of goods?
- What are the key regulatory considerations for fostering financial inclusion in trade, particularly within the African MSME context?
- How can additional legal/regulatory infrastructure provide security to insurers and reinsurers who are apprehensive to enter the African market?
- How should the industry approach building and improving data infrastructure? How important is a well-established data flow for insurers looking to get involved in African trade finance?
- What is the right balance between providing African companies, specifically SMEs, with sufficient capital vs. insurers/reinsurers having enough risk information about the clients, and how can data technology help create this balance?
- Can you touch on how improved data can address corruption problems, and what impact that will have on the credit insurance appetite in Africa?
- What measures of support can be given to SMEs to ensure they are given more capital, and have the most pertinent information for how to get access to this? How can this impact different lengthed/sized facilities?
- How has MIGA approached the government or sub sovereign clients and provided assistance and what would be the successful approach?
- Is there currently a lack of assistance in this area? While it is great to talk about what could help, we need to address what is actually happening. If there is a lack of assistance on emerging technologies and strategies, how detrimental is it to the efforts of closing the African trade finance gap?
New Funding Sources
- What strategies and steps would you recommend for expanding the credit insurance market that could provide guarantees to sellers or banks in Africa, targeting both deep-sea companies and domestic transactions? Is there a role in governments to help secure new funding streams?
- How can TCI backstop corporates and banks to bridge the trade finance gap? Do you have any examples of markets where this has worked?
- Do you have any examples of failed efforts to inject liquidity into the African trade finance market, and how can future sources learn from these failures?
- What is needed for new players to enter the market and provide additional liquidity and financing to African governments, companies, specifically SMEs? How does the industry need to reframe the issue of the African trade market, and move forward with innovative ideas?
- Should we look at accelerating the development of trade finance as an asset class?
Panel Questions and Answers
Richard Wulff: That depends on why insurers do not provide cover. When countries do not have hard currency, a good risk doesn’t address the concerns. We do see cover on African conglomerates with treasury outside the home country, in order to become independent of these issues.
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