The African Development Bank and the Bank of Africa Tanzania (BOAT) have signed a $7.5 million trade finance transaction guarantee facility to boost trade finance activities of the Bank of Africa in Tanzania.

Under the facility, AfDB will provide a guarantee of up to 100 percent to confirming banks, covering non-payment risks from letters of credit and other trade finance instruments issued by Bank of Africa Tanzania. 

Patricia Laverley, country manager for Tanzania at the Dar Es Salaam-headquartered lender, says the guarantee will “aid priority sectors such as trade, agriculture, manufacturing and energy”. 

“This facility will support trade by enabling Bank of Africa Tanzania to play a more strategic role in the regional and international market,” she says. 

The signing of the agreement marks a significant milestone in the African Development Bank Group’s direct engagement with Tanzania’s private sector, reinforcing its commitment to strengthening the country’s financial sector and economic development.

Deputy managing director Hamza Cherkaoui adds: “This partnership strengthens our ability to support businesses across various sectors by providing seamless trade finance solutions, expanding our confirmation network, and enabling access to top-tier confirming banks.” 

AfDB says the facility aligns with its intention to promote regional integration, increase food security and industrialise the continent.  

By supporting intra-African regional trade, it also contributes to the objectives of the African Continental Free Trade Area, the multilateral financial institution says. 

Tanzania’s Vision 2025 plan aims to increase the country’s economic resilience, while its Country Strategy 2021-2025 focuses on job creation, both of which are also expected to benefit from the facility, AfDB adds.

Trade finance is essential for facilitating Tanzania's international and domestic trade, supporting the movement of goods and services by mitigating risks and providing working capital.

Banks in Tanzania offer various trade finance products, including Letters of Credit (LCs), bank guarantees, LPO financing, invoice discounting, pre-shipment and post-import financing, documentary collections, and trade loans.

Tanzania's trade finance sector is evolving, with increasing recognition of its importance for economic development. While challenges, particularly for SMEs, persist, recent regulatory changes and initiatives by financial institutions and development partners indicate a move towards improving access and efficiency in trade finance.