The African Development Bank (AfDB) has approved a US$15million trade finance line of credit for UniBank Ghana, to enhance its capacity to finance small and medium enterprises (SMEs) and indigenous firms operating within the tradable sector.
The facility is a fully-funded three-year trade facilitation (senior) loan that will be used by UniBank to support trade finance (TF) instruments issued largely in favour of Ghana’s SMEs and indigenous firms.
The project will help address critical market-demand for TF and dollar liquidity by supporting trade for indigenous firms and SMEs in vital economic sectors: such as non-traditional exports, agri-business, construction and light manufacturing. It will foster financial sector development, enhance regional integration and contribute to government revenue generation at a time the Ghanaian economy is faced with fiscal pressures and liquidity challenges.
It will result in the provision of significant trade finance support to local businesses and SMEs in Ghana for longer tenors than generally available. Counting roll-overs, the project is expected to facilitate approximately US$90million of export-import related activity in intermediate and finished goods, raw materials and equipment to support economic growth.
The majority of African banks have small capital bases, which constrains their ability to obtain adequate trade limits from international confirming banks and to undertake sizeable transactions that have significant development impact. AfDB’s additions to the project stems from its ability to increase UniBank’s capacity to support trade by availing affordable medium-term liquidity support for on-lending to SMEs and indigenous firms in Ghana.
The proposed facility aligns with AfDB’s 10-Year and Regional Integration strategies, and particularly with the Bank’s Financial Sector Development Strategy that seeks to increase access to financial services for the underserved, and broaden and deepen Africa’s financial systems.
It also aligns with the bank’s Private Sector Strategy by contributing to the improvement of the investment and business climate in Ghana by supporting UniBank with medium-term trade finance; promoting enterprise development in Ghana through increased access to appropriate trade finance for SMEs and local corporates.