The facility will be used to extend credit to businesses across African markets, with a particular focus on small- and medium-sized enterprises (SMEs) involved in regional and international trade, according to people familiar with the deal signed in Washington DC.

The trade finance gap in Africa is estimated to be $120 billion, constraining cross-border commerce on the continent.

BII, the UK’s development finance institution, has previously worked with Absa to provide more than $1 billion in trade finance since 2019 across markets including Ghana, Nigeria and Kenya. The relationship helped maintain liquidity during the pandemic when traditional financing sources contracted.

While the African Continental Free Trade Area agreement has helped to boost intra-regional trade, banks have struggled to meet demand for financing, especially from smaller businesses.

Anneliese Dodds, UK development minister, said the facility would help address “a pressing challenge” in African trade finance. The deal comes as development finance institutions face growing pressure to demonstrate impact amid scrutiny of their effectiveness in emerging markets.

Absa has said the plan would align with the bank’s broader sustainability targets, extend liquidity to clients across various geographies, and high-demand trade product sects. It seeks to reverse the detrimental effects of the COVID-19 Pandemic on regional liquidity.

Admir Imami, Director, Head of Trade & Supply Chain Finance at BII said, “We are delighted to continue our partnership with Absa which is based on a shared ambition to progress inclusive and economic development, particularly for underserved groups including SMEs and women.”