AFDB Invests In Global Trade Liquidity Programme

The African Development Bank (AFDB) group has approved a $500 million investment in the Global Trade Liquidity Programme (GTLP) as the second phase of its Trade Finance Initiative (TFI).

The first phase approved in March 2009 was a $500 million in lines of credit to supporting trade financed by African banks, bringing the combined ceiling for both phase 1and 2 to US$1 billion.

The initial US$ 500 million investment by the bank makes the GTLP the single-largest contributor to African trade finance. AFDB's presence helped increase the share of GTLP resources specifically targeted for Africa.

'The bank's TFI is a temporary strategy to respond to the request by African Ministers of finance to address current market constraints. Therefore the GTLP aligns well with both regional member countries and bank priorities,' Bobby Pittman, AFDB Vice President for infrastructure, private sector and regional integration said.

In this period of crisis, the AFDP intends to use its maximum capacity, innovate and work in complementarity with other agencies to play a counter-cyclical role while continuing to finance long-term developments,' he added.

The GTLP is a temporary crisis-response initiative among development finance institution (DFIs) and donors to support trade finance in the developing world.

The GTLP will pool resources from DFIs and donors and will use two primary investment structures- a risk-sharing structure,  whereby funding will be channeled to local trade finance banks through international banks; and direct dedicated lines of credit to local banks with regional coverage.

By providing liquidity and sharing risk with African financial institutions, the GTLP will facilitate Africa's exports and imports at a time when the global financial crisis is cutting off critical funding, the AFDB said, adding that 'the projected US$ 15billion GTLP resources for African trade finance will thus support African economies and reduce job losses.'

The GTLP is also expected to have a strong demonstration effect to catalyse African and international banks back into the trade finance sector.

The programme is in line with the bank group's response to the economic impact of the financial crisis, which comprises an emergency liquidity facility; TFI and framework for accelerated resource transfer to countries eligible for African Development Fund (ADF) support.