On 4 November, Standard Chartered and British International Investment (BII), the UK’s development finance institution, announced the signing of a $350 million risk participation agreement to support emerging markets in Africa and South Asia.
The two institutions have been working together since 2013 when they signed a $75 million risk participation agreement that was extended to reach almost $400 million in total in the 11 years since.
The agreement then facilitated over $10 billion in trade across Africa and South Asia. Kenya, Tanzania, Nigeria, Bangladesh, Pakistan, and Nepal were among some of the countries that could access sources of investment that would otherwise have remained out of reach.
Initially, funding was intended to facilitate the vital flow of essentials, including food and healthcare. The renewed facility will help small and medium enterprises (SMEs) and corporations in the region access trade finance, which should increase their export capabilities and boost growth.
The renewal will also allow new countries to gain access to trade finance and expand even more industries, from healthcare to technology to infrastructure.
The trade finance gap is widest in emerging economies, with SMEs bearing the brunt of the issue: 45% of banks’ rejected applications for trade finance are to SMEs, a figure far higher than the proportion of SME requests. In West Africa, over a quarter of all applications for trade finance are rejected; even when they are not, premiums are up to 10 times higher than in developed countries.
In these regions, trade finance is considered a riskier investment and often avoided by mainstream institutions. Even when trade finance does reach these countries, SMEs often struggle to access it, as they lack information about available instruments or are seen as too risky: 17% of all rejections in 2023 were due to insufficient collateral, an issue faced by many SMEs with thin margins who are looking for financing.
According to Saif Malik, Head of Banking & Coverage, UK, at Standard Chartered, the collaboration between Standard Chartered and BII is set to “connect the world’s most dynamic markets in trade, investment and capital flows”.
Anneliese Dodds, the UK’s Development Minister, welcomed the partnership for its support towards delivering critical products to support SMEs and corporates. “Trade plays an important role in economic transformation, and this facility demonstrates how BII can work with financial institutions to support our shared development objectives”.
