Africa’s economic growth is increasingly constrained by a persistent and widening trade financing gap, estimated at over $80 billion annually. This deficit undermines the continent’s ability to fully harness its trade potential, with small and medium-sized enterprises (SMEs) bearing the brunt of limited access to credit and trade finance. In response, a new initiative led by British International Investment (BII) and Ghana International Bank (GHIB) is taking significant steps to address this critical challenge, aiming to unlock growth and foster resilience across Africa’s frontier markets.
The Scale and Impact of the Trade Finance Gap
The trade finance gap in Africa, which stood at over $80 billion in 2019 and has since grown, represents a major bottleneck for businesses seeking to engage in both domestic and international trade. The African Development Bank now estimates the shortfall at approximately $120 billion, exacerbated by global banks’ risk aversion and the scaling back of their African operations. This shortfall is particularly damaging for SMEs, which form the backbone of African economies and account for up to 80% of jobs on the continent. Without adequate trade finance, these businesses struggle to access new markets, expand operations, and contribute to economic development.
The BII-GHIB Partnership: Targeting Frontier Markets
In a landmark move, BII and GHIB have launched a $50 million trade finance facility targeting seven African frontier markets: Rwanda, Tanzania, Sierra Leone, Liberia, The Gambia, Benin, and the Democratic Republic of Congo. This initiative is a cornerstone of BII’s Africa Resilience Investment Accelerator (ARIA), which seeks to channel investment into markets underserved by both commercial banks and development finance institutions.
The facility is designed to expand access to credit for SMEs, enabling them to trade seamlessly with international partners, stabilize supply chains, and drive economic growth. By providing much-needed liquidity, the initiative aims to transform the economic landscape of these countries, supporting job creation, value addition, and regional integration.
Innovative Approaches and Broader Partnerships
The BII-GHIB initiative reflects a broader trend toward innovative financing solutions in Africa. Development Finance Institutions (DFIs) like BII play a crucial role by taking on risks that commercial banks are reluctant to bear, offering guarantees and liquidity support that make trade finance more accessible. The partnership also demonstrates the importance of tailored, market-specific approaches, recognizing that a one-size-fits-all solution is insufficient for the continent’s diverse economies.
Other key players, such as the African Export–Import Bank (Afreximbank), have also been instrumental in addressing the trade finance gap through a range of instruments, including pre- and post-export financing, letters of credit, and guarantee facilities. Since its inception, Afreximbank has supported over $140 billion in approved trade finance, with a strong focus on empowering SMEs and overcoming barriers related to collateral and high lending rates.
Implications for Africa’s Economic Future
The infusion of trade finance through initiatives like the BII-GHIB partnership is a critical step toward mitigating the longstanding challenges of limited credit availability in Africa’s frontier markets. Improved access to trade finance can help optimize business operations, drive value creation across supply chains, and boost investor confidence. Moreover, by strengthening the financial ecosystem, such initiatives support broader economic and socio-political stability, catalyzing a virtuous cycle of growth and resilience.
As Africa moves toward greater economic integration, exemplified by the African Continental Free Trade Area (AfCFTA), closing the trade finance gap will be essential for realizing the continent’s full potential. Strategic partnerships, innovative financing instruments, and targeted interventions are paving the way for a more inclusive and prosperous African economy-one where businesses of all sizes can thrive on the global stage.
In summary, the new initiative by BII and GHIB is a promising development in the ongoing effort to close Africa’s $80 billion trade financing gap. By unlocking capital, reducing risk, and empowering SMEs, it sets the stage for sustainable economic growth and deeper regional integration across the continent.