Trade Development Bank

Economic enabler: This facility will allow the Trade Development Bank (TDB) to provide short-term (less than two years) trade finance products (e.g. pre-/post-shipment loans, import finance facilities) to corporates in Africa. The corporates will mostly be existing private sector clients requiring renewal or top-up loans, but may expand to new borrowers as economies emerge from the COVID-19 crisis. Increased credit will enable corporates to continue to import/export strategic inputs, agricultural or commodity goods. This will sustain and potentially increase business operations.

Pan-Africa; 99 per cent exposure to category ‘A’ and ‘B’ countries in the trade finance portfolio.

Given diversity of sectors, employee/suppliers will be low and high-skilled. Key sectors include infrastructure, energy, agribusiness and banking; The characteristics of corporates reached are assumed to be large as TDB extends direct ticket lines to these businesses ($10 – 50 million).

The trade finance portfolio is expected to grow by approximately 15 per cent year-on-year. Based on an illustrative pipeline, CDC’s loan is expected to support four to six facilities depending on the tenor of the underlying loan. (Projections have been adjusted to reflect the COVID-19 market context.)

• Duration: Impact is connected to loan book growth and will occur over two years or the lifecycle of the facility.
• Depth: Limited visibility on depth. The World Bank recently adjusted growth projections for Africa from 2.4 per cent in 2019 to -2.1 to -5.1 per cent in 2020. As a result, impact is expected to be deeper in a context of increasing unemployment and lower access to goods/services). Countries with smaller/less developed capital markets ex. A & B countries, will feel the effects of COVID-19 more acutely than more developed markets.

3.0-3.6 (range provided based on June ’20 exposure in trade finance portfolio)

Financial: The commercial market does not offer capital in sufficient quantities to meet companies' plans / needs. which is exacerbated by increasing retrenchment of capital during COVID-19.

• Alignment: Risk relating to use of proceeds include: (i) using the facility to refinance facilities; (ii) expressed preference for a longer tenor. Mitigation: the use of proceeds is contractually limited to short-term lines (less than two years) excluding refinanced facilities. Visibility on incremental/new growth is limited to reporting on the use of our facility but CDC will also monitor overall growth of TDB’s portfolio (bi-annual reporting).
• Alignment: Risk relating to TDB’s reach as the bank services (i) sovereign clients and has an (ii) oil and gas exposure. Mitigation: (i) is mitigated to a certain extent by limiting use of proceeds to private sector clients; (ii) ensuring that the facility is aligned with our Climate Change Policy. The majority are petroleum imports to category ‘A’ and ‘B’ countries which TDB recognises as strategic commodities to these countries.
  • Evidence: Visibility on the businesses served and ultimate impact on employees/customers depends on the bank’s ability to provide data. Mitigation: Data will be provided by the bank to the extent possible to better understand the impact that we are having.