Afreximbank launches Afreximbank Trade Payment Services

Monday 3 October 2022 15:04 CET | News

African Export-Import Bank (Afreximbank) has launched Afreximbank Trade Payment Services (AfPAY) to facilitate the settlement of international trade.

Afreximbank developed the product specifically to address the banking challenges confronting African economies due to the withdrawal of many international banks from the continent – exits attributable to stringent regulatory and compliance requirements as well as costs.

AfPAY, which has been in a pilot phase for over a year, currently facilitates over half a billion dollars in monthly payments across African member states. Notably, Zimbabwe has participated actively in the pilot, with 20 of its financial institutions using the solution.

Over the years, financial institutions on the continent have suffered from the reduction in their access to international correspondent banking services to facilitate their international trade. This curtailment of trade lines shut the entrance of African financial institutions to the rest of the world. Trade is the number one driver of growth, and banks’ inability to participate in trade transactions will lead to reduced growth in African economies and increased poverty.

African banks and the trade finance market

Over the last ten years, Africa’s trade growth has been one of the worst among the major global regions, mostly due to falling commodity prices, competition, inadequate foreign exchange liquidity, regulatory challenges, and access to trade finance. Although trade finance remains a popular activity among banks, the participation rates have decreased. Despite this persistently large trade finance gap, trade remains a key driver of Africa’s social and economic development. As a result, development finance institutions such as the African Development Bank and the Afreximbank have sought to provide solutions to boost intra-Africa trade.

African Export-Import Bank launches Afreximbank Trade Payment Services (AfPAY) to facilitate the settlement of international trade.

According to Afreximbank, USD 5 billion flowed out of Africa in Q1 2020 alone, adding to a trade finance gap that already stood at USD 82 billion.

On 1 January 2021, significant progress was made with the commencement of free trade under the African Continental Free Trade Area (AfCFTA) for African countries that had ratified the AfCFTA agreement and submitted their tariff offers, an initiative that had been in pipeline since 2012.

The role of digitalisation in trade finance

Digitising trade dinance seeks to address the gap in global trade financing by working with the public and private sectors to identify and develop technologies and associated technology standards that facilitate connections between digital islands, trade finance inclusion for small and medium-sized enterprises (SMEs), and trade tech for emerging market economies (EMEs).

The aim is to increase interoperability amongst trade finance platforms so that network size and effects can be maximised. For instance, a trade finance API standard for cross-region data-sharing could link various ecosystems.

Trade tech has boundless potential to eliminate the inefficiencies prevalent in today's trade finance sphere. COVID-19 has made it difficult to go about business in the traditional way, but its silver lining is that corporates realise the need to speed up the digitalisation of trade finance.

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Keywords: product launch, banks, trade finance, compliance, payments
Categories: Banking & Fintech
Companies: Afreximbank
Countries: Africa
This article is part of category

Banking & Fintech


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