Photo: Carsten Steger / Wikimedia Commons, CC BY-SA 4.0
Africa Finance Corporation and Munich Re have launched a US$1 billion risk-sharing programme intended to expand trade finance capacity for African financial institutions.
A standing facility for trade lending
The Unfunded Managed Debt Mobilisation Programme gives AFC committed risk-sharing support from Munich Re for eligible trade finance transactions. It replaces a deal-by-deal model used by the two organisations since 2018 with a standing framework based on risk limits agreed in advance.
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Under the arrangement, Munich Re automatically takes an agreed share of qualifying transactions, while AFC keeps part of the risk. AFC says the structure should allow faster decisions and enable it to support more lending without relying solely on its own balance sheet.
The first phase covers 38 financial institutions across 11 African countries. It will support commercial letters of credit, trade loans and trade guarantees — instruments banks use to help businesses pay suppliers, import goods and sell into export markets.
Capacity can be reused
The facilities are for transactions of up to 12 months. As borrowers repay and individual deals mature, the risk capacity becomes available again for new trade transactions.
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That revolving feature matters because African banks often face limits in accessing the credit support needed to confirm letters of credit or finance cross-border commerce. A risk-sharing partner can help lenders take on transactions that might otherwise exceed their internal exposure limits.
AFC says the arrangement is also the foundation for its broader Managed Debt Mobilisation Programme, through which other African and international institutional investors could participate either by supplying funding or sharing risk. The corporation said it is in discussions with potential participants.
Why it matters for African trade
The programme arrives as the African Continental Free Trade Area seeks to deepen commerce between African economies. Expanding the availability of trade finance is central to that ambition: firms cannot reliably move goods across borders if banks cannot provide the guarantees, credit lines and short-term working capital that underpin transactions.
For Black businesses, producers and exporters across the continent, stronger local banking capacity could mean more practical routes into regional supply chains — from agriculture and manufacturing to logistics and services. The benefit will depend on whether participating banks pass the additional capacity through to smaller firms as well as large corporate clients.
AFC said the initiative reflects a wider push by development finance institutions to mobilise private capital alongside public and institutional lending. Munich Re, meanwhile, gains exposure to African trade finance through AFC’s network while diversifying its own risk portfolio.
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The programme follows AFC’s creation in August of AFC Captive Insurance Company, a Bermuda-based subsidiary backed by up to US$30 million in equity capital. Together, the two structures are intended to help AFC manage risk more efficiently and extend the reach of its financing across African markets.