Tightening credit conditions are driving international banks out of trade financing slowdown of world economies, which has constricted global trade by four per cent.

Reminiscent of the 1990s when various banks closed shop in a period now known as the lost decade of Africa, the financial sector is optimistic that this time the continent is ready to cover itself, given growth in the financial sector.

It has emerged that the index of availability of trade finance in developing countries declined by 4.3 per cent to 48.5, which is below the crucial threshold of 50.
However, for Africa, the index fell from 52.5 to 47.2,” said African Export – Import Bank (Afrex-imbank) president Benedict Oramah during a Structured Trade Finance Seminar in Nairobi.
The Afrex-imbank official said Africa has much more resources with various Pan-African banks.  Some Pan-African banks such as the United Bank of Africa p/c (UBA), Ecobank Transnational Incorporated (ETI), First Bank Nigeria and South Africa’s Standard Bank had expanded rapidly in the years up to the global financial crisis, starting or buying operations across the sub-continent.
Structured trade financing will be key in mitigating financial risks and help boost Africa’s contribution to the global economy which currently stands at measly three per cent.
Central Bank of Kenya Deputy Governor Ms. Sheila Mbijjiwe said the diversity of trade within the region will be critical in stabilizing Kenya’s financial market.  She said that a dozen of Kenyan banks are currently doing cross-border trade.
Forty per cent of trade is regional.  Looking at the shilling, the year-on-year depreciation is 14 per cent and sits between Canada and Australia,” she said, adding that there is need for a stable and efficient financial sector, whose multiplier effect can help spur growth.  Proposals at the forum are expected to help stabilize the continent’s economies.

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