ABA Editorial · Jan 18, 2026 · 14 min read
African trade finance faces a gap estimated at approximately USD 120 billion annually, limiting the ability of businesses to finance imports, exports, and working capital. Afreximbank has been the most active regional development finance institution in closing this gap, while commercial banks have largely retreated from trade finance in African markets. This report maps the landscape.
Trade finance is the set of financial instruments that allow businesses to bridge the gap between committing to a commercial transaction and receiving payment from the counterparty. In international trade, these instruments include letters of credit, bills of exchange, documentary collections, supply chain finance arrangements, and various forms of pre-export and post-shipment financing. For African businesses, access to trade finance is one of the most binding constraints on cross-border commerce. The African Development Bank and other sources have estimated that the African trade finance gap (the difference between trade finance demand and available supply) reaches approximately USD 120 billion annually, with smaller enterprises facing the most severe constraints on access. Commercial banks in many African markets have reduced their trade finance operations due to compliance costs, capital requirements, and perceived risks, leaving a gap that development finance institutions, specialist trade finance providers, and emerging digital platforms are attempting to fill. This report maps the trade finance landscape.
The African Export-Import Bank (Afreximbank), headquartered in Cairo, has been the most active regional institution in African trade finance over the last decade. The bank provides letters of credit, working capital financing, factoring, and other trade finance instruments to African businesses engaged in imports, exports, and intra-African commerce. Afreximbank has also built a broader portfolio of programs including pandemic response financing, healthcare and health product manufacturing support (the USD 2 billion facility for pharmaceutical manufacturing), and infrastructure investment.
Afreximbank's role has expanded significantly during periods when commercial banks retreated from African trade finance. During the 2020 to 2022 period of pandemic disruption and commodity price volatility, the bank increased its commitments substantially to support African businesses facing trade disruption. The bank's capital base has grown through successive rounds of shareholder contributions and market borrowings, and its operational footprint now extends across most African countries.
Commercial banks have been reducing their African trade finance operations over the last decade for several reasons. International banks (particularly European and American institutions) have faced increased regulatory compliance costs related to anti-money-laundering and sanctions enforcement, making the cost of maintaining correspondent banking relationships with African counterparts higher than the revenue these relationships generate. Local and regional African banks have faced their own capital constraints and risk management challenges that limit their capacity to extend trade finance at the volumes the market demands.
The specific effect has been a reduction in the availability of letters of credit and other traditional trade finance instruments for African businesses, particularly smaller enterprises that lack the commercial relationships to secure the remaining capacity at commercial banks. Larger corporations with established banking relationships have generally continued to access trade finance, while smaller exporters and importers have increasingly had to work without it or with much more expensive alternatives.
Supply chain finance (SCF) is a category of trade finance instruments that use the commercial relationships between large buyers and their suppliers to provide financing to the suppliers at rates based on the buyer's credit quality rather than the supplier's own credit profile. The model is particularly valuable for small and medium suppliers to larger corporations, because it allows them to access financing at rates they could not obtain through their own banking relationships.
Several African operators have built supply chain finance platforms targeting specific buyer-supplier relationships in African markets. Lendable, Asante Financial Services Group, and others have developed products that extend credit to suppliers based on confirmed purchase orders or invoices from creditworthy buyers. These platforms leverage the information and payment processing capabilities of digital systems to reduce the operational cost of SCF provision, which has historically made the product uneconomic for small transaction sizes.
Trade finance for intra-African commerce (African businesses trading with other African businesses) faces specific challenges that do not apply to North-South trade. Intra-African payments often require conversion through third-currency intermediaries (typically US dollars or euros) because African currencies are not widely traded against each other. This introduces foreign exchange costs, settlement delays, and counterparty risks that add friction to intra-African commerce. The Pan-African Payment and Settlement System (PAPSS), launched under the Afreximbank and AfCFTA umbrella, is intended to address this problem by enabling direct settlement between African currencies without requiring intermediary conversion.
PAPSS has been rolled out progressively across African central banks, with participating institutions able to process cross-border payments in local currencies through the system. The practical scale of PAPSS transactions remains modest relative to total African cross-border payment volumes, but the infrastructure is being built and the potential impact on intra-African trade finance is significant if adoption continues to grow.
A growing category of digital trade finance operators is attempting to use technology to reduce the cost of delivering trade finance products to smaller African businesses. These operators include invoice financing platforms, purchase order financing providers, and specialized digital factors that buy receivables from African exporters at discounted rates. The digital approach works because it can automate underwriting, documentation, and collection processes that traditional trade finance provision requires expensive human operations to handle.
The commercial success of digital trade finance operators depends on whether they can underwrite risk effectively in environments where traditional credit information is limited. Operators who have developed proprietary data sources, built relationships with specific buyer networks, or focused on narrower product categories have generally performed better than operators attempting to serve broader markets with less specific information advantages.
Alongside Afreximbank, other development finance institutions including the IFC, the European Investment Bank, the African Development Bank, and various bilateral development finance agencies provide trade finance or guarantees for African businesses. These DFI programs operate at various scales and have different eligibility criteria, collectively forming a patchwork of support that partially offsets the commercial bank retreat. The aggregate DFI contribution to African trade finance availability is significant but not sufficient to close the USD 120 billion gap, and sustainability of DFI programs depends on the broader funding commitments to DFI institutions.
Three indicators will shape African trade finance. First, whether PAPSS adoption expands sufficiently to meaningfully reduce foreign exchange friction for intra-African payments, supporting AfCFTA trade growth. Second, whether digital trade finance operators continue to scale their African operations, providing alternatives to traditional commercial bank products that have become harder to access. Third, whether Afreximbank and other development finance institutions maintain or expand their African trade finance commitments in the face of competing capital demands. Trade finance is the financial plumbing of African commerce, and its availability determines how much of the trade that agreements like AfCFTA enable can actually happen in practice.