The African Development Bank (AfDB) has approved a $4 million trade finance transaction guarantee for Access Bank Sierra Leone Limited (ABSL). This initiative seeks to empower local businesses.

The facility would specially benefit Small and Medum scale Enterprises (SMEs) and women-led enterprises in the economy. FS was hinted that the facility would bridge financing gaps and facilitate international trade engagements.

The guarantee being provided by the AfDB, FS learnt, is rated AAA and is offering comprehensive coverage to international confirming banks against non-payment risks associated with ABSL's trade finance transactions. This assurance, FS sources stated will enable ABSL to finance key imports of consumer goods particularly essential food items like rice, cereals, and cooking oil—that are fundamental to the country’s value chain. By supporting these transactions, the facility is projected to facilitate approximately $36 million in trade over the next three years, promoting significant economic activity within the country.

Lamin Drammeh, Head of Trade Finance at the AfDB, highlighted the transformative potential of this facility for the private sector in Sierra Leone. He stated, 'By addressing critical financing gaps, we're enabling SMEs to participate more actively in regional and global trade, ultimately contributing to job creation and improved livelihoods'. This sentiment underscores the growing recognition of SMEs as vital players in achieving sustainable economic growth and job creation, which is still in a transitional phase as it strives for economic stability and development. The imperative to enhance intra-African trade is more relevant than ever, particularly in the context of the African Continental Free Trade Area (AfCFTA), which aims to create a single market for goods and services across the continent. This trade finance guarantee aligns with the AfCFTA's objective by facilitating trade transactions that can spur regional economic integration and development.

The Managing Director at ABSL, Ganiyu Sanni expressed optimism about the potential impacts of the guarantee, stating, 'This AAA-rated guarantee will help the bank to grow their trade finance book and support Sierra Leone. Particularly, it will support our issuances of trade finance transactions in critical sectors such as agribusiness (importation of strategic soft commodities) and trading of intermediate goods.' His comments reflect a strategic focus on bolstering essential sectors that can drive economic resilience and sustainability in Sierra Leone.

This Transaction Guarantee is part of the AfDB's broader strategy to support trade finance across Africa. It was launched back in 2021, this facility designed specifically for local banks, providing a much-needed safety net in the complex landscape of international trade. By covering a variety of trade finance instruments—including confirmed letters of credit, trade loans, irrevocable reimbursement undertakings, and other bills, the AfDB intent is to mitigate the risks often associated with lending and trade.

For letter of credit (L/C) issuing banks, the facility offers significant advantages. Many such banks often find themselves constrained by cash margins required for their L/Cs or have exhausted their confirmation lines with correspondent banks. This instrument alleviates those challenges, allowing banks that meet AfDB's due diligence to participate, thereby improving their capacity to support local importers and exporters. Moreover, the AfDB also extends 3.5-year trade finance lines of credit to local banks, further enhancing their ability to mobilize capital for trade. This suite of financial instruments not only empowers banks but also catalyzes growth in strategic sectors of the economy, particularly commercial enterprise, which is crucial for food security in Sierra Leone.

With $4 million trade finance guarantee to ABSL—means to support SMEs and foster international trade, this initiative promises to enhance job creation, economic diversification, and overall socio-economic development in the country. Such strategic interventions are essential for building resilient local economies capable of thriving in an increasingly integrated and competitive world.