Africa Finance Corporation and Munich Re have signed a US$1 billion managed debt mobilisation programme aimed at expanding trade finance capacity for African banks, converting an eight year deal by deal relationship into a standing facility.
The vehicle is named the Unfunded Managed Debt Mobilisation Program. Under it the two institutions have agreed risk parameters and limits in advance, so Munich Re automatically takes a share of eligible AFC trade finance transactions while the corporation retains part of the risk on each deal. It is unfunded, meaning the reinsurer supplies credit risk protection rather than cash. Because the underlying transactions run to no more than twelve months, capacity is freed and reused as deals mature.
The first phase covers commercial letters of credit, trade loans and trade guarantees, and reaches 38 financial institutions across 11 African countries. The programme anchors a wider Managed Debt Mobilisation Program, which the corporation describes as a platform through which other investors can participate alongside it, either by providing funding or by sharing risk. Both parties have agreed to review the scope over time, and the corporation says it is in discussions with other African and global institutional investors about joining.
Banji Fehintola, executive board member and head of financial services at the corporation, framed the deal as part of a shift towards an originate-to-distribute model, saying that managed debt mobilisation sits at the heart of this transition. Wola Asase, deputy director and head of syndications, set out what changes in practice: "Munich Re has shared risk on AFC loans since 2018, one transaction at a time."
Herbert Muller, head of global credit solutions at Munich Re, put the logic plainly: "Munich Re benefits from the strong pan-African footprint of AFC while AFC benefits from the strong capacity of Munich Re."
The scale check matters. The African Development Bank puts the continent's trade finance gap at between US$74 billion and US$92 billion, so a US$1 billion programme addresses roughly one per cent of the lower bound. The same research finds commercial banks intermediated just 23 per cent of African trade in recent years, down from about 40 per cent before the pandemic, with more than a third of trade finance applications rejected.
Worth noting for balance: the regulatory capital benefit of unfunded protection accrues to the protection buyer, which here is the corporation rather than the 38 banks. What those banks gain is volume and speed, in the form of larger and faster confirmation and payment lines. The structure also sits alongside a pattern of multilateral and insurer risk sharing on the continent, including facilities arranged by the International Finance Corporation with Deutsche Bank and with Standard Chartered.
Africa Finance Corporation was established in 2007 and counts 48 member countries, with more than US$19 billion invested across 36 African countries since inception.
