Programmes in the Non-Dual Recourse (NDR) category are operated with direct recourse to one obligor. Such deals are done with established corporates and banks, and/or where the legal regime allows proper perfection of securities.
- Line of Credit Programme
- Direct Financing Programme
- Syndications Programme
- Special Risks Programme
- Financial Future-Flow Pre-Financing Programme
- Local Currency Programme
1. Line of Credit Programme
This is a programme through which the Bank provides funded and unfunded credit lines to creditworthy African and non-African banks designated the Bank’s Trade Finance Intermediaries (TFIs). The Bank uses the programme to work in partnership with African and non-African banks in reaching the target beneficiaries of its resources, who due to their small size, would otherwise not be able to access the Bank’s resources directly.
- central banks;
- commercial banks;
- finance companies;
- export houses;
- institutions active in trade finance in Africa; and
- similar institutions in non-Participating states of the Bank (for financing of imports from participating states).
720 days but extendable.
Linked to the Libor and related to country risk, transaction risk and market Conditions
This may include a Facility Agreement, Security Assignment Deed, Legal Opinions, etc.
Available facilities under the Programme:
The facilities provided under the Line of Credit Programme include:
1.1 Pre- and Post-export Financing Facility through which the Bank provides export financing to Eligible Entities. The Bank may finance up to 75% and 80% of the underlying sales contract for pre-export and post-export transactions respectively.
1.2 Letter of Credit Confirmation and Refinancing Facility through which the Bank confirms and/or refinances sight and usance Letters of Credit covering Eligible Items.
1.3 Export Credit Guarantee Facility through which the Bank provides credit guarantee in support of exporting corporates to enable them obtain competitively priced export finance facilities. Under the Facility, the Bank may also provide guarantees in support of African banks seeking export finance Lines of Credit from international banks. The Bank may guarantee up to 100% of credit exposure to the guaranteed entity.
1.4 Reimbursement Guarantee Facility which is used by the Bank to enable African and non-African banks take the credit risk of Eligible Banks, being banks that satisfy Afreximbank’s Risk Acceptance Criteria and granted unadvised Lines of Credit by the Bank under its Universal Lines of Credit (Unlocs) Initiative. In this regard, the Bank issues a guarantee covering the payment risk of African and non-African banks under Letters of Credit or other acceptable trade debt instruments. Under the Facility, banks confirming Letters of Credit issued by Eligible Banks may approach the Bank to provide reimbursement guarantee to be called in the event of non-payment by the Letter of Credit issuing bank. This Facility is to help African banks to issue Letters of Credit without the need for cash collateral and at reasonable cost. It also helps African banks to accept Letters of Credit issued by banks they are not familiar with, without requesting the confirmation of such Letters of Credit. It therefore facilitates intra-African trade and trade with the growing new markets of the BRICs (Brazil, Russia, India and China).
1.5 Correspondent Banking/ African Letter of Credit Facility under which the Bank (a) offers correspondent banking services to African banks assisting them to make payments and collections around the world, with particular emphasis on Africa; and (b) offers dedicated Letter of Credit Confirmation Facility for promotion of intra-African trade. This Facility is hinged on the extensive experience the Bank has gained across Africa through the use of African banks as TFIs.
2. Direct Financing Programme
Under this programme, the Bank provides pre-and post-export financing directly to corporates with balance sheet size of at least US$2 million and an annual trade turnover of at least US$10 million.
- Large corporates operating in Africa as exporters and/or importers.
- Large corporates importing Eligible Goods from African countries.
Available Facilities under the Programme:
- Pre- and post-export financing (up to 75% and 80% of the underlying sales contract for pre-export and post-export transactions respectively);
- Import Financing (Letter of Credit Issuance) Facility (up to 70% of the underlying sales contract); and
- Export Credit Guarantee (up to 100%). This may be granted to a corporate for possible assignment to local and other lenders thereby enlarging access of these entities to trade financing.
Linked to the Libor and related to country risk, transaction risk and market conditions.
3. Syndications Programme
This is a risk-sharing programme that the Bank uses to leverage trade and project financing into Africa. Through this programme, the Bank arranges or joins a syndicate or club of reputable international and/or African banks in providing financing to African entities in trade and/or project-related activities.
To leverage international financing into Africa by sharing the risks of such transactions with other banks and financial institutions.
Central banks, commercial banks, finance companies, export houses, African and non-African corporates engaged in Eligible Transactions.
Up to 7 years depending on transaction.
Linked to the Libor and related to country risk, transaction risk and market conditions.
The syndicates the Bank participates in must be providing those facilities that fall within the Bank’s mandate and may cover the broad areas of export, import and project-related financing.
Special Features of the Programme:
Under the syndications the Bank arranges or participates, lending may be made based on a single Loan Agreement between Afreximbank and the borrower and a Participation Agreement between the Bank and each Participant in the syndicate. The participation of other banks is, however, usually fully disclosed. Through this mechanism, the commercial risks in the transaction are shared fully by the Bank and the Participants, but participants also benefit from the tax and country risk privileges the Bank derives from its preferred creditor status under the Agreement among Participating States of the Bank. The Bank may join in co-financing with local banks, in which case, the Bank provides the foreign currency requirements of a transaction while local banks provide the local currency component. The Bank usually shares the security interests with the local banks. Through this mechanism, the Bank aims at deepening the activity of local banks in export financing while at the same time alleviating the foreign exchange constraints to exporting activities in member countries.
4. Special Risks Programme
This programme is conceived as a risk-bearing programme through which the Bank aims to achieve the following strategic objectives:
- to enlarge the opportunities for arranging structured trade finance deals in the Continent, thereby encouraging trade finance inflows to Africa;
- encouraging African banks to take the payment risk of their African counterparties. Also, to enable international banks to take the sovereign risk of African economies;
- to permit international banks to lend over periods longer than 360 days to Africa; and
- to strengthen African exporters’ position in accessing new markets by covering them against the political and economic risks of those markets.
The following two facilities are provided under the Programme:
4.1 Country Risk Guarantee Facility
This programme is aimed at making the sovereign risk of African countries more acceptable by transferring this risk to Afreximbank credit risk. Under this programme, Afreximbank guarantees international and African banks with credit exposures to Africa against certain country risk events.
- To facilitate the trading of Africa’s trade debts;
- To share risk with banks financing African trade, or credit insurance companies, providing cover against African trade payment risks;
- To cover financing banks where African country risk is found unacceptable;
- To reduce the stringent requirements for lending to Africa; and
- To enhance the credit of African borrowers.
- Insurance and other institutions active in trade finance in Africa; and
- Holders of African trade debt papers. The holder of the paper so guaranteed at maturity will be reimbursed in case certain country risk events occur.
Up to 7 years.
Bank, Trade Credit and project loans including contingent obligations. Old (existing or previously contracted) debt and commercial credits would not qualify.
Coverage is for up to 100% of Lender’s exposure with respect to specific country risk events, namely:
- exchange control regulation;
- retroactive imposition of export and/or import restrictions;
- moratorium on debt payment; and
- change in law or policy affecting the timing, currency or manner of debt repayment.
Afreximbank Comparative Advantage in providing the Guarantee:
- AFREXIMBANK is an international financial institution and not subject to controls in any of its Participating States. Thus, the credit risk of the Bank is the only consideration in determining any exposure to Afreximbank.
- The Bank is owned partly by African countries who are signatories to the Bank Agreement. Under the Agreement, the Bank’s property, assets and operations are in each Participating State free from restrictions, regulations, supervisions, controls, moratoria, and other executive, administrative, fiscal and monetary restrictions of any nature (Article IX of Afreximbank Agreement). Thus, Afreximbank enjoys preferred Creditor Status in member countries (similar to those enjoyed by the World Bank, African Development Bank, and some other multilateral organizations).
To African Traders: Eases access to credit with better conditions.
To Lending Banks: Brings more comfort to grant more competitive terms, and to be more active in trade finance in Africa.
A guarantee fee related to assessed country risk.
- Guarantee Agreement; and
- Legal Opinions.
4.2 Investment Guarantee Facility
The Bank offers Investment Guarantees to cover foreign direct investment inflows into Africa. It is offered to country funds, Foreign Direct Investment (FDI) providers in trade-promoting ventures, investors in CDM projects that are likely to generate carbon credits, investors undertaking Build Operate and Transfer (BOT)-type projects in Africa, and similar deals. Under this Facility, investors in eligible projects are protected against the risk of expropriation of dividends and other specified government action that may hinder the investor from normal operation, repatriation of profit, etc.
The guarantee may be for a fixed term of 5 years, but may be renewed.
The Bank charges guarantee fees dependent on market conditions then prevailing.
5. Financial Future-Flow Pre-Financing Programme
Financial future-flow transactions refer to future-flow debt offerings that rely upon receivables not generated from export of physical goods for repayment. Such receivables include credit card or cheques, migrant remittances, royalties arising from Bilateral Air Services Agreements (BASA), over flight fees, etcetera.
Afreximbank uses this instrument in financing projects that do not themselves have sufficient receivables to support any borrowing.
This is a financial product intended to assist African governments and/or banks with significant remittance receipts, and other Future Financial Flows, such as credit cards, fishing royalties, over flight fees, etc., to access reasonably-priced external trade and project financing from the international credits markets using those flows as sources of repayment.
The Programme is intended to benefit the following:
- African governments and/or their agencies; and
- African banks with significant remittance and credit-card business as well as trade finance payment rights.
Eligible Financial Future Flows:
- International money transfers;
- Credit card flows;
- Over flight fees, fishing royalties and similar flows; and
- Trade finance payment rights.
- Eligible money transfer companies are those that meet the Know-Your-Customer and Anti-Money Laundering standards of the Bank.
Information to be Supplied:
- Applicants are required to supply amongst other documents details of the Financial Future Flow receipts for the immediate past 3 years.
Linked to LIBOR and related to country risks, transaction risks and market conditions, and relevant fees. Pricing is competitive and driven by market practice and the Bank’s cost of funds.
6. Local Currency Programme
This programme serves important trade facilitation function as it helps the Bank to provide matching currency to its clients’ needs, for example, providing working capital financing for the purchase of local inputs for export manufacturing. Further, in a number of sub-regions operating or planning to introduce currency areas, the local currency programme helps promote intra-regional trade.
Instruments used in programme delivery include loans and guarantees, as described below:
6.1 Counter-Party Risk Guarantee Facility Related To Forward Exchange Contracts
Justification: One of the reasons why import financing by international banks to African entities has been rare is because lending banks face local currency risks. This is because the imports are paid for in local currency which must then be converted into hard currency to meet the repayment of such facilities. Accordingly, international banks most times require hard currency cash collateral before they open or confirm letters of credit for African entities, even when they are in a position to take the country risk or where they can purchase country risk cover in the market.
It is obvious that were there to be an active forward market for hedging African currency risks, this cash collateral requirement may be reduced. The existence of an active forward market for a number of African currencies is itself difficult due to few participants, a scenario that arises due to high counter-party risk. Further, African exporters face currency risks when they finance their operations with local currency and receive hard currencies as export proceeds.
The purpose of this Facility is to mitigate these risks by guaranteeing the forward delivery performance of Eligible Beneficiaries, and therefore begin to widen the scope for trading in African currencies.
Eligible Currency Forwards covering trade and related transactions in Eligible Items.
- Failure of an Eligible Beneficiary to deliver US dollars or Euro on a future date as agreed with a hedge counter-party; and
- Failure of an Eligible Beneficiary to deliver Local Currency on an agreed future date.
- Trade Finance banks.
- Corporates engaged in trade. Such corporates must have a minimum capital base of US$2 million, and minimum turnover of US$10 million per annum;
- Market-Makers in Eligible African currency trading; and
- Finance companies and investors in African trade debt papers and/or exportrelated projects.
The future delivery obligation guaranteed will normally not exceed 360 days.
- Future delivery of US dollars or Euro in exchange for Eligible African Currency; and
- Future delivery of Eligible African Currency in exchange for US dollars or Euro.
- National Currencies of Participating States as from time to time determined by the Bank;
- United States Dollars; and
- The Euro.
- It assists exporters who funded their operations through local borrowing to hedge against exchange rate fluctuations;
- It helps export manufacturers to source raw materials locally since the hedge will ensure that funding used in making such purchases can be insulated from currency mis-match;
- It helps African importers and banks to access international financing for imports; and
- Access of private investors to international import financing helps the governments cushion pressures on their currencies.
Stand-by L/Cs or other acceptable instruments of guarantee.
- Foreign Exchange Forward Contract;
- Guarantee Instrument; and
- Legal Opinions.
Extent of Cover:
100% of the face value of the Forward Contract.
A guarantee fee related to the credit risk involved.
6.2 Local Currency Loan Facilities
The loans are provided through existing programmes and facilities but in Local Currencies.
The Programmes are:
- Lines of Credit to Banks
- Direct Financing Programme