Dubai-headquartered bank Mashreq and British International Investment (BII) have signed a US$50mn trade finance agreement aimed at boosting imports and exports in South Asia and Africa.
The deal, announced this week, will see Mashreq and the UK’s development finance institution (DFI) share risk on transactions in Angola, Bangladesh, Benin and Côte d’Ivoire, as well as other markets in the coming year.
Under the arrangement, BII will assume 70% of the risk undertaken by Mashreq when it issues trade finance lines to local and regional banks.
A BII spokesperson tells GTR the partnership is its first with a UAE banking partner and the deal will enable Mashreq to be a “more active player” in Africa and South Asia.
“As Mashreq is keen to grow its trade finance business in emerging economies, it is natural for Mashreq and BII to partner and support the trade flow within these parts of the world. The programme focuses on pan-Africa and South Asia. Hence, it’s flexible enough to support Mashreq’s key markets, while encouraging Mashreq to also explore other markets as it expands,” they say.
According to a November 26 statement from BII and the Middle Eastern lender, their partnership will help close the trade finance gap in emerging regions where access to bank financing is often strained.
“The collaboration is instrumental in providing the much-needed US dollar liquidity to support the import of critical goods to these countries during challenging economic conditions. It addresses a growing trade finance gap, driven by rising inflation and decreasing investor interest outside of traditional banking,” they say.
The difference between trade finance supply and demand – known as the trade finance gap – is estimated by the Asian Development Bank to stand at US$2.5tn globally, up from US$1.7tn in 2021.
BII has struck several deals aimed at boosting trade finance in Sub-Saharan Africa this year, including a US$150mn facility for Absa Bank, a US$100mn risk-sharing deal with Citi and a US$10mn agreement with NMB Bank Zimbabwe to boost agricultural exports.
