Monday, May 11 2015: Ecobank Transnational Incorporated (ETI), parent company of the Ecobank Group and the African Trade Insurance Agency (ATI) have signed a risk sharing agreement that will cushion the bank against exposures associated with lending to customers.
The credit risk insurance provided by ATI will support credit facilities provided to Ecobank customers. This includes commercial loans, invoice discounting facilities, letter of credit confirmations and advance payment guarantees.
“Ecobank and ATI have entered into this risk sharing agreement in countries where both Ecobank and ATI have a presence namely; Benin, Burundi, Democratic Republic of Congo, Kenya, Malawi, Rwanda, Tanzania, Uganda and Zambia,” said Sebastian Ashong-Katai, Ecobank Group Head, Financial Institutions and International Organizations.
ATI will extend this facility to any other country that ATI intends to venture into such as, Cote d’Ivoire, Ethiopia, Ghana, Nigeria, South Sudan and Togo, he added. The partnership also stands to benefit most West African countries since ATI is also working on a medium-term plan to bring ECOWAS countries into membership.
The partnership with ATI offers Ecobank greater opportunity to extend credit facilities to a number of its customers and grow its market share.
Ecobank Kenya Managing Director Ehouman Kassi said: “We are delighted with this partnership as we add value to our business by providing safety nets for our investors’ funds and extend guaranteed financial services to our customers. This agreement between Ecobank Transnational Incorporated and ATI is a framework for the sharing of risks between the two entities and its subsidiaries across Africa.”
The framework of the agreement provides guidelines within which Ecobank can utilise ATI insurance products. As the credit business portfolio and political (investment) insurance business grows, the bank is keen to ensure prudent fiscal management mechanisms are in place to guarantee security for its customers’ businesses.
The insurance facility cushions the bank’s credit business and guarantees a measure of stability in case of financial instability in the market. Furthermore, this arrangement will guarantee a safety net for Ecobank’s investors.
“As we grow our risk-taking business in Ecobank, it is necessary that we also expand on our risk mitigation options.” Kassi said. He added: “The use of credit insurance will allow us to increase credit to our customers, whilst at the same time managing our credit risk,” he said.
Since 2001, ATI has been on a mission to promote trade and investments both within Africa and into it.
“We have supported trade and investments in various sectors worth over $17 billion and we are keen to double this figure within the next five years. This partnership is a step in the right direction. We are also in discussions with African Central Banks to see how ATI cover can be converted into capital relief for banks (as done in developed economies) and ultimately more lending power. This will be a game changer for businesses in Africa,” said ATI Chief Executive Officer, George Otieno.
In recent years the securitisation of loans and bond portfolios have become a major issue in financial circles, considering the growth in large scale trade financing. The East Africa region’s volume of collateralised loan and bond obligations is noteworthy for any prudent financial institution.
To support Ecobank Kenya’s business growth objectives, ETI as its parent company injected an additional capital investment of Kshs 4.3 billion last November.
