The Board of Directors of the African Development Bank (AfDB) Wednesday approved an unfunded $200-million Risk Participation Agreement (RPA) with Standard Chartered Bank (SCB) to provide finance for trade in vital African economic sectors such as agribusiness and manufacturing.

The Bank said in an official statement that “the majority of African banks have small capital bases which constrain their ability to obtain adequate trade limits from international confirming banks and to undertake sizeable transactions that have significant development impact” on the continent.

As a 50/50 risk sharing arrangement, SCB will match AfDB’s $200 million facility, thereby creating a maximum portfolio of up to $400 million.

The Risk Participation Agreement which will be for a period of three years will help address critical market demand for trade finance in Africa, foster financial sector development, regional integration, and contribute to government revenue generation.

The AfDB’s value added lies in the use of its “AAA” rating to share trade risk and expand the trade finance capacity of banks in Africa, thereby expanding trade and strengthening regional integration. Counting roll-overs, it will facilitate approximately $2.4 billion of trade in intermediate and finished goods, raw materials and equipment to support economic growth.

The $200-million Risk Participation Agreement (RPA) with SCB is in line with AfDB’s Regional Member Countries’ priorities to promote trade and in accordance with the African political objectives as reaffirmed during the 18th African Union Ordinary Session held in January 2012. It also aligns with the Bank’s Regional Integration Strategy, which seeks to consolidate the Bank’s engagement in trade finance in Africa.

Standard Chartered Bank is a universal banking group headquartered in London and strategically focused on Asia, Africa and the Middle East. It is a leading provider of trade finance in Africa. SCB facilitated over $10 billion of trade in Africa in 2011 alone. It has 15 African subsidiaries and over 200 correspondent banking relationships in Africa. SCB has a long term rating of A1 (Moody’s) and AA- (Fitch and S&P).