Africa’s trade finance gap narrows

BRAZZAVILLE: AFRICA’s trade finance sector showed resilience in the aftermath of the Covid-19 pandemic, with the continent’s unmet demand for trade finance declining between 2019 and 2024, according to the African Development Bank’s (AfDB) latest Trade Finance report.

The report estimates Africa’s trade finance gap ranged between 74 billion US dollars and 92 billion US dollars in 2024, with the lower estimate representing 5.4 per cent of the continent’s total merchandise trade value.

The AfDB said interventions by development finance institutions, governments, export credit agencies and global banks helped sustain trade flows during a difficult global economic period.

Without such support, the report noted, Africa’s annual trade finance gap could have exceeded 100 billion US dollars between 2020 and 2024.

Commercial banks continue to underserve African trade, intermediating an average of only 23 per cent of total trade during the review period, down from 40 per cent recorded between 2011 and 2019.

However, intra-African trade financing improved significantly, accounting for 34 per cent of total bank-intermediated trade between 2020 and 2024.

Foreign exchange shortages emerged as the leading obstacle limiting growth in trade finance, with 36 per cent of surveyed banks identifying limited forex liquidity as their main challenge.

The report also highlighted slow adoption of digital trade finance solutions, with only 28 per cent of surveyed banks using digital platforms due to high implementation costs and weak technological infrastructure.

Despite the slow uptake, banks acknowledged benefits, including faster processing, improved transparency, lower costs and enhanced security.

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The AfDB further noted that development finance institutions facilitated about 32 billion US dollars in trade finance annually during the 2020–2024 period, helping narrow the continent’s financing gap.

The report called for continued support from DFIs, improved foreign exchange availability, greater digital adoption and deeper regional financial integration to strengthen Africa’s trade-led growth.