Ousman Gajigo* Thouraya Triki Lamin Drammeh African Development Bank

Transcription

1 Ousman Gajigo* Thouraya Triki Lamin Drammeh African Development Bank

2 Mo#va#ons for the Study The recent approval and inauguration of the Trade Finance Program by the Board of the AfDB. The limited information in general on trade finance in Africa. Recent trade finance surveys that have been carried out have limited coverage of the African market. Policy consideration: More up to date information makes it less challenging to design interventions to address constraints in the sector.

3 The Survey The focus of the survey is on bank- intermediated trade finance. More than 900 commercial banks on the continent were contacted with questionnaires through . Period covered: 2011 and 2012 High response rate: 275 banks in 45 countries responded. Wide coverage: all sub- regions of the continent covered. Many aspects of trade finance in Africa are provided for the first time in this survey. Full report forthcoming soon.

4 High Par#cipa#on Rate: Most Banks in Africa Provide some form of Trade Finance No Trade Finance (8%) No Trade Finance (7%) Yes - Trade Finance (92%) Yes Trade Finance (93%)

5 Bank intermediated Trade Finance is Significant: Average Cumula#ve Value of Trade Finance Assets of African Banks [approx: USD 300 billion] close to es#mate of other surveys (e.g. IMF & BAFT- IFSA 2011) 136 USD Millions Off Balance Sheet On Balance Sheet Total

6 Significant sub- regional heterogeneity in average value of bank- intermediated trade finance USD Millions North Africa 1, Southern Africa West Africa Off Balance Sheet East Africa On Balance Sheet Central Africa 136 6

7 Significant Bank Income: Average share of Bank Income from Trade Finance Ownership Type (2011 & 2012) Over time 25% 20% 15% 14% 17% 18% 21% 25% 20% 17% 18% 17% 10% 15% 5% 10% 0% Maj Public Maj Foreign & Private Maj Local & Private Other 5% 0% Total

8 Share of bank- intermediated trade finance for intra- African trade is high: It exceeds the propor#on of Africa s trade done within the region % of bank trade finance for intra- African trade % of bank trade finance for intra- African trade by sub- region 21.4% 21.0% 21.2% 17.7% 16.1% 16.9% Off Balance Sheet On Balance Sheet East Africa Southern Africa West Africa North Africa Central Africa On Balance Sheet Off Balance Sheet Total 0% 20% 40% 60%

9 LeXers of Credit (LCs) s#ll the most important instrument in bank- intermediated trade finance. Median value of LC increasing over time Cumulative number of LCs issued in 2011 & 2012 on average West Africa USD Millions 218 Southern Africa 426 North Africa 2,071 East Africa All Sample Central Africa 137

10 Yet High Unmet Demand for Access to Finance: Bank ejec#on rates for issuing LeXers of Credit (2011 & 2012) Whole Sample By Bank Type 3% 3% 1% 0% 0% 5% 8% 5% 3% 7% 2% 0% 89% 89% 93% 92% [over 30%] [20% to 29%] [10% to 19%] [0% to 9%]

11 Yet High Unmet Demand for Access to Finance : Rejec#on rates for issuing LeXers of Credit 0% 0% 6% 6% 13% 5% 6% 2% 3% 2% 2% 4% 4% 4% 4% 5% [over 30%] [20% to 29%] 87% 88% 89% 92% 89% 89% [10% to 19%] [0% to 9%] Central Africa East Africa North Africa Southern Africa West Africa All Regions

12 Yet High Unmet Demand for Access to Finance : On Balance sheet Trade Finance (e.g. short- term pre- export & post- import loans): Approval Rates Over time By sub- Region (2011 & 2012) 75% 76% 75% 65% 74% 74% 79% 80% Total Central Africa Southern Africa West Africa East Africa North Africa

13 While there have been significant increases in pricing for trade finance instruments during the financial crisis ( ), pricing seems to have stabilized between 2011 & 2012 in Africa Ranges for Quarterly Fee Rate (%) by banks for Issuing LCs [above 2%] 9% 8% 23% 23% [1.1% to 2%] 35% 35% 34% 34% [0.6% to 1%] [0% to 0.5%]

14 Banks cannot meet all the demand for trade finance due to numerous constraints Reasons for denying LC requests Product or instrument limit 4% Other 9% Client credit worthiness 40% Insufficient limits with your confirming/lc re- issuance bank 9% Forex liquidity 9% Single obligor limit 16% Balance sheet constraint 13%

15 Reasons for Rejec#on of on- balance Sheet Trade Finance Applica#ons (e.g. short- term pre- export & post- import loans) Product or instrument limit 6% Client credit worthiness 42% Other 12% Forex liquidity 9% Balance sheet constraint 15% Single obligor limit 16%

16 Confirma#on of LCs is a Major Constraint for African Bank in Trade Finance Critical in Africa since most letters of credit (LCs) issued by African banks require confirmation. Virtually all the African commercial banks that issued a letter of credit needed some or all of their LCs to be confirmed. Risk limits of many confirming banks for African LCs are already binding. Sometimes cash collateral is required of African banks while LCs issued in other regions do not require confirmation.

17 Main Confirming Banks for LCs Issued by African Banks: Many Interna#onal Banks in Play Standard Chartered Bank, 9% Citibank, 9% Other, 48% Deutsche Bank, 7% Commerzbank, 7% Banque BIA, 2% Standard Bank, 5% UBAF, 5% HSBC, 4% Société BNP Paribas, 3% Générale, 3%

18 Average default rates in trade finance Africa, while low, are s#ll higher than other regions of the world where it averages less 1% Trade Finance Default Rate over time Default rate by bank type 4% 4% 4% 3.5% 4.4% 4.8% 6.1% Total Maj Foreign & Private Maj Local & Private Maj Public Other

19 There are high varia#ons in default rates in trade finance in Africa along various dimensions By Bank Age By sub- Region 6.4% 6.3% 3.7% 2.9% 2.8% 1.6% 1.1% 2.6% 3.6% 3.9% Less than 10 Years 10 to 20 Years 20 to 30 Years 30 to 40 Years Above 40 Years

20 However Trade Finance Default Rates are much Lower than other Lending Ac#vi#es by Banks Trade Finance Default Rates (2011 &2012) Average NPLs (2011 & 2012) 10% 12% 1.1% 2.6% 3.6% 3.9% 6.3% 4% 6% 7%

21 Banks outlook on Trade Finance

22 Expected increase in Banks trade Finance ac#vi#es in the near term All Banks By sub- region No Answer 13% No 15% 8% 8.5% 14% 15% 14% 8.5% 17% 12% 42% 36% 83% 68% 74% 50% 50% No Answer No Yes Yes 72%

23 Poten#al Constraints to Trade Finance Growth Perceived by Banks Other factors listed by banks include: Bank performance concerns. Lack of centralized credit information in the economy. Higher competition. Limited economic growth 24% Forex liquidity 18% Other 12% Capital constrain t 17% Bank regulatio ns 14% Limited bank capacity 15%

24 Thank you