Namibia gears up for trade finance seminar

Namibia is set to host an international trade and trade finance seminar and workshop, promising to enlighten attendants on what’s happening in the world of trade.

The African Export-Import Bank (Afreximbank) introduced the Annual Structured Trade Finance Seminar and Factoring Workshop in 1999 already.

This year’s event will be held from 5 to 8 November.

The Namibian (TN) spoke to Afreximbank’s managing director for trade finance and correspondent banking, Gwen Mwaba (GM), on the upcoming seminar and workshop.

TN: What is the objective of the annual event, and what are the benefits for attendees?

GM: This seminar was started because we recognise that it’s very expensive for banks to send large teams outside of the African continent to receive this type of training.

So, the bank took the conscious decision to bring that expertise to the African continent.

The key objective is to provide participants with valuable knowledge on what is going on in the world of trade, as well as to impart technical skills training and structuring skills.

TN: What can participants expect of this year’s seminar?

GM: We will have an economist giving us updates on what’s going on in global trade, and that feeds into how we as trade finance practitioners navigate what is often a very complex environment within the African context.

This year, we’re going to have a speaker who will look at how we can unleash supply chain financing.

The bank has conducted a chief executive trade survey and we will share the results of that survey at the seminar.

There will also be a session on lessons in commodities financing markets and market failures elsewhere.

On day two, we will explore technical training, where we will impart structuring skills, such as how to structure a commodities transaction, how to identify risk, understanding what risk is, and what risks traders should be looking out for.

Day three will cover the Loan Market Association in London discussing the documentation that supports the transactions that the deal originators would structure, and what they should be looking for in legal documentation.

There will also be a panel discussion, including some Namibian participants and some of our sponsors.

On day four there will be a standalone workshop dedicated to factoring.

TN: Why is the seminar held in Namibia?

GM: Because we want to create more connections in Namibia and also just see more participation from Namibia in terms of Afreximbank. We generally rotate this seminar across all of our member states, and we try to pick a different region and a different country each year.

We hope to come away with much stronger collaborations, more clients, and more Namibian entities benefiting from Namibia’s shareholding in the bank.

TN: Who is your target audience for the seminar?

GM: We serve all parts of the economy.

Our client set is made up of sovereigns.

So, we definitely work with governments, and we provide solutions to sovereigns directly to state-owned entities. We also work with central banks and financial institutions.

They become our agents or intermediaries to access some of the clients who don’t qualify for our direct lending programmes.

And then, of course, for those clients in the private sector who qualify for our direct lending programmes we also provide solutions directly.

TN: What is structured trade finance?

GM: In a nutshell, structured trade finance is a type of financing through which you would ensure that the commodity you have financed becomes the security for the financing structure.

Your source of repayment will also come from the sale of that commodity. So in a nutshell, you could say structured trade financing is a type of financing which is self-securing and self-liquidating.

TN: What are the advantages of digitising trade finance and what role can this play in facilitating African trade?

GM: There are a number of benefits for digitising trade finance.

And I just want to clarify that this does not mean people would lose their jobs.

It’s really more about bringing in and introducing efficiencies, because automation reduces the amount of time that’s required, for example, to process transactions.

As a consequence it reduces costs.

We’ve also seen increased transparency brought about, for example, by having digital marketplaces where people can actually list their transactions.

So you can see at what price the transactions are clearing the markets.

Lenders go onto these marketplaces together with those who are looking for financing. So that’s quite useful.

Another benefit of digitising trade is improved security compared to paper trails. The ability to scale up very quickly is another benefit, meaning you can access a larger pool of the market.

This is why you’ve seen a lot of fintech being very successful, particularly in the small and medium enterprise (SME) space, because they’re using technology-driven lending rather than the traditional form of lending.

Afreximbank launched and is piloting its Pan-African Payments and Settlement System (Papps), which was engineered specifically to facilitate trade across Africa.

The Papps enables cross-border trade in local currency.

We will have a session on Papps during the seminar and delegates in Namibia will be able to get first-hand information.

Right now we have 13 central banks across Africa that have already signed up and 115 commercial banks are already on the platform.

TN: How big is the trade finance gap in Africa?

GM: The African Development Bank (AFDB) does an annual survey to try and assess the trade finance gap.

It has consistently remained quite static between US$90 billion and US$110 billion every year.

There are a couple of reasons for this.

One is that every time there is a crisis, international banks withdraw their trade financing capacity to African markets, or they scale back limits, which leaves a lot of trade that goes without financing.

The second reason is that when you look at the data that supports that gap, it’s largely made up of SMEs.

The SME rejection rate for access to finance is much higher than the rejection rate for corporates – as high as 54%.

So, out of every 100 applications submitted, 54 are rejected.

Conversely, with corporates, that rejection rate is under 20%. This is because SMEs are seen as very risky.

The trade finance gap is therefore largely made up of SMEs.