International Finance Corporation (IFC) and the Berne Union (BU) host the first joint capacity building workshop to share information about trade & project finance risk enhancement instruments to support trade and economic development in Africa’s emerging economies.
NAIROBI, 3 July 2015 – The African banking sector faces unique challenges that limits its ability to compete with international counterparts. For starters, local banks pay more for capital than the rest of the world at an average of 4% for USD. They also require a higher level of collateral than most Western Banks. Hamstrung by these setbacks, the industry is now receiving support on different fronts from international players.
A ground breaking initiative, launched today, is expected to help banks compete for larger projects and to expand their lending volumes. The workshop is part of a multi-pronged effort backed by the World Bank’s International Finance Corporation (IFC) and the Berne Union (BU), the leading association for export credit agencies (ECA) and investment insurers worldwide, with the special collaboration of ATI (Africa), SACE (Italy), PwC (Germany), Zurich (USA) and SINOSURE (China).
With the mission to support the international business of their respective countries, in 2014, the Berne Union members collectively insured US$1.9 trillion of exports and foreign direct investment – more than 10 percent of international trade, and indemnified US$4.6 billion to exporters, banks and investors protecting them from losses suffered due to buyer defaults in all regions of the world.
A few years ago, the IFC – BU initiative began as a discussion about how Berne Union members could work with the World Bank to increase global trade. With sound growth figures and vast investment potential, Africa was seen as a good starting point. The workshop will focus on strategies that can enable local banks to build new business around export credit financing and insurance, while increasing regional trade.
This group of international institutions will also meet in a separate function with bank Chief Executive Officers in Kenya to discuss concrete trade and finance risk mitigation instruments along with policy interventions expected to include discussions with the Central Bank of Kenya on granting capital relief on ECA backed transactions. This would help reduce the amount of allocated capital that banks must now set aside to cover loans in line with international standards. This move would remove the greatest hurdle to allowing the local banking sector to compete with international banks and, most agree that it would also enable banks to inject more capital into the local economy.
Similar efforts were recently applied with the Central Bank of Congo, which finally led to a landmark decision last week with the announcement that that they are halving the amount of equity required by banks on loans that are insured by the African Trade Insurance Agency (ATI). This is an initiative that ATI had been negotiating for the past three years with COMESA member Central Banks. With this current initiative, the group is hoping that more Central Banks across Africa will recognise the wisdom of Democratic Republic of Congo’s decision and follow suit.
ATI is one of only two African companies, along with South Africa’s Export Credit Insurance Corporation (ECIC), represented within the Berne Union. Other individuals and members, who will participate in the workshop include Michal Ron, Head of International Business for SACE (Italy’s export credit company) and the Vice President of the Berne Union; Philipp Rossberg, PwC partner and Chief Operating Officer of the federal export credit guarantees of Germany, which is jointly managed by Euler Hermes and PwC; SINOSURE, China’s ECA; and ZURICH, a private global insurer.
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Note to the Editor:
The African Trade Insurance Agency (ATI) is Africa’s multilateral insurer of commercial and political risks. Founded in 2001 by African States, ATI provides Political Risk, Trade Credit Risk Insurance and Political Violence and Terrorism & Sabotage cover to protect African investments and trade. ATI has supported over US$17 billion in trade and investments across Africa in sectors such as agribusiness, energy, exports, housing, infrastructure manufacturing, mining and telecommunications. Since 2008, ATI has been ranked the highest rated insurer in Africa with a Long Term ‘A’ Stable rating for Financial Strength and Counterparty Credit by Standard & Poor’s.
www.ati-aca.org
Berne Union
The Berne Union – International Union of Credit & Investment Insurers – is the leading international association for the export credit and investment insurance industry. It works for cooperation and stability in cross-border trade. The 80 members of the Berne Union, including the Berne Union Prague Club, covered over US$1.9 trillion worth of international business in 2014, which was 10% of the world’s total cross-border trade. Members are both private companies, offering worldwide risk management solutions, and state backed export credit agencies, focusing on the support of national exports and outward investments.
The Berne Union has well established links with organisations that play important roles in world trade including the ICC, IMF, OECD, World Bank, WTO and regional development banks.
www.berneunion.org
IFC
IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. Working with private enterprises in about 100 countries, we use our capital, expertise, and influence to help eliminate extreme poverty and boost shared prosperity. In FY14, we provided more than $22 billion in financing to improve lives in developing countries and tackle the most urgent challenges of development. For more information, visit www.ifc.org
www.ifc.org
Contacts:
Berne Union
Kai Preugschat, Secretary General
T: +44 20 7841 1110
E: kpreugschat@berneunion.org
IFC Sub Saharan Africa
Neha Sud, Communications Officer
T: +254 20 2937403
M: +254 720 348499
E: nsud@ifc.org
