Against the backdrop of increasing changes in socioeconomic development, African Export Import (AFREXIM) Bank, has tasked regional banks in Africa to be responsive to the emerging changes in economic environment.
AFREXIM Bank President, Dr Benedict Oramah, warned that banks operating within the region can no longer stand aloof without adjusting to the changing business and addressing the consequential challenges.
He spoke at the ongoing Advanced Structured Trade Finance Seminar and Workshops at Sal Island, Cape Verde.
Oramah said, ” The role of technology in supply chain finance; the potentials of the block chain technology, Artificial intelligence, and the spread of mobile payments all have implications on the skills, technology and regulatory framework that will govern trade financing into the future”.
He explained that as technology breaks down borders and bitcoins become more acceptable, the role of banks in trade financing will begin to change and traditional approaches wane.
Oramah, noted that direct business to consumer transactions across borders, without instruments of traditional correspondent banks may shrink certain trade finance offerings but may also open new opportunities.
” In all of these, a new commodity class, called Data, is emerging. Trading in Data and financing that trade may well be the same for structured trade finance professionals in the future. Africa’s exploding population and limited data privacy laws may position the continent to be a significant player in this evolving landscape. The big question, distinguished ladies and gentlemen is whether African bankers and banks are prepared for the rapidly changing business environment”, he queried.
He said the need to improve intra trading activities across the region informed the decision of AFREXIM Bank, seventeen years ago to initiate the annual seminar and workshop.
He said this year’s edition of the Structured Trade Finance training course, the 17th in the series is not only meant to equip the participants with skills to structure bankable trade and supply chain finance deals of varying levels of complexity, but also to prepare every one of them as agent for driving intra-African trade and structural transformation of Africa.
He said it is also intended to bring to the fore the rapid changes that are affecting trade financing and what these may mean for the way the region originate and structure deals.
” It would help us to create networking opportunities that would enable us to jointly build useful banking partnerships and share ideas on innovation. It is such cross fertilisation of ideas that will keep us all abreast of developments in the increasingly technology-driven world.
The AFREXIM Bank boss, noted that the role of financing in all of these cannot be overemphasised, adding that creating the export manufacturing capacities the continent needs would require billions of dollars in financing the enabling infrastructure as well as the acquisition of the equipment the factories will .need.
He said the bank estimates that about $25 billion dollars exists as intra-African trade financing gap annually even today.
He added that due to novelty of regional markets, there is need to create instruments that will mitigate payment risks, including country risks, for traders
Oramah, noted that from history, international banks had not supported intra-African trade for various reasons:
According to him,the international banks had traditionally favoured commodity financing which lent itself to the use of classical structured trade financing techniques to mitigate perceived risks in the continent.
He said under such structures, the international banks usually assumed the performance risks of African commodity exporters, while transferring the payment risks to Organisation for Economic Cooperation and Development (OECD) countries.