UK development finance institution British International Investment (BII) has signed a $100-million risk-sharing facility for supply chain finance with trade and supply chain finance solutions multinational Citi to provide systemic liquidity and help Citi grow its supply chain finance product across Africa.
The facility will enable Citi to increase supply chain finance facilities to existing customers and offer them to new customers. These facilities bring much-needed working capital to supply chains as they allow suppliers to Citi’s corporate clients to be paid early and at a beneficial rate of finance, BII says.
The facility will be targeting small and medium-sized enterprise (SME) suppliers and those underserved or excluded businesses.
It will boost Citi’s annual supply chain finance volumes in Africa by up to $400-million, with amplified capital support that will enable businesses to better manage cash flow and onboard new suppliers to the supply chain, ensuring the continued flow of goods and services.
This will help expand the scope of local businesses and ensure productive and inclusive economic opportunities for diverse groups and communities.
The partnership between Citi and BII will help bring flexible capital in local currency to markets where access to finance can be limited for businesses owing to the risk which local and international financial institutions attach to lending to the SME space in Africa, and exacerbated by the Covid-19 pandemic.
The facility uses an innovative structure that is a first in this market, BII says.
“BII’s Trade and Supply Chain Finance (TSCF) programme has supported $20.9-billion of trade across Africa and South Asia through partnerships with regional, international financial intermediaries.
"Our partnership with Citi presents an opportunity to help catalyse greater commercial capital to African businesses, bolstering trade and supply chain activities throughout the continent,” says BII TSCF head and director Admir Imami.
The agreement demonstrates the potential for flexible British finance combined with strategic partnerships to help reinforce Africa’s supply chains, foster dynamic UK-Africa trade links, and accelerate sustainable economic growth across the continent, he says.
The investment aligns with United Nations Sustainable Development Goal 8, which is 'decent work and economic growth' and Goal 17, which is 'partnerships for the goals'.
“We are delighted to come together with BII to support the growth of supplier financing in sub-Saharan Africa. Citi is committed to helping economic progress in the communities in which we operate,” says Citi Treasury and Trade Solutions trade and working capital solutions global head Chris Cox.
“This agreement will enable us to expand our supply chain finance offering and increase credit to suppliers most in need, in particular the small and medium-sized enterprises (SMEs) that normally have limited access to financing,” he says.
Under the facility, BII, which was formerly known as CDC Group, will act as a guarantor for supply chain finance facilities provided by Citi, mitigating the financial risks involved. BII and Citi have agreed to set impact criteria to ensure that flexible capital is being directed toward underserved groups and broad-based black economic empowerment enterprises for whom access to capital can be limited.
The increased working capital will promote financial inclusion, support SMEs and improve the resilience for diverse suppliers and buyers, which will help strengthen Africa’s supply chain and keep trade flowing across the continent.