African Development Bank provides $10 million guarantee to Exim Bank Tanzania

The African Development Bank (AfDB) and Exim Bank Tanzania Limited have signed a $10 million trade-finance transaction guarantee agreement in Dar es Salaam. The facility is designed to cover up to 100% of eligible non-payment risks for banks confirming letters of credit and other similar trade-finance instruments issued by Exim Bank Tanzania.

This mechanism aims to reduce counterparty risk, allowing the bank to secure additional trade-finance lines from international financial institutions while minimizing the need for foreign-exchange collateral. The AfDB estimates that this $10 million guarantee could support up to $60 million in trade transactions over a three-year period.

The initiative targets Tanzania’s estimated $1.3 billion annual trade-finance gap, which heavily impacts small and medium-sized enterprises (SMEs). These businesses, which represent over 90% of the country's enterprises and approximately one-third of its GDP, often face constraints due to high borrowing costs and collateral requirements. The facility is expected to facilitate trade in critical sectors, including agriculture, health, energy, and manufacturing, specifically supporting the import of items such as fertilizer, pharmaceuticals, and agricultural equipment.