AfDB and Mashreq Agree Trade-Finance Guarantees as African Businesses Face Funding Gap

The African Development Bank Group has signed an agreement with Dubai-headquartered Mashreq to support cross-border trade transactions involving African banks, as businesses across the continent continue to face constraints in obtaining trade finance.

Announced on 13 October 2026, the arrangement brings Mashreq into the Bank’s Trade Finance Transaction Guarantee programme as a confirming bank. The mechanism is intended to help eligible African issuing banks access international trade-finance capacity.

The African Development Bank says unmet demand for trade finance in Africa was estimated at between $74 billion and $92 billion in 2024, based on its 2025 Trade Finance Report. Small and medium-sized enterprises are among the businesses most affected by gaps in access.

Trade finance is a practical part of international commerce. Importers and exporters often need payment assurances, working capital or documentary instruments before goods can be shipped or released. Banks facilitate these transactions, but the willingness of counterparties to accept risk can determine whether a deal proceeds.

In a typical letter-of-credit transaction, an issuing bank undertakes a payment obligation on behalf of an importer. A confirming bank may add its own payment commitment, giving an exporter greater assurance. The confirming bank must, however, be comfortable with the risk it assumes.

Under the new arrangement, the African Development Bank can provide transaction-by-transaction guarantees covering up to 100% of the non-payment risk assumed by Mashreq on qualifying transactions from Bank-approved African issuing banks.

The guarantee does not mean every trade transaction is automatically covered. Eligibility, approval and the terms of each transaction remain important. Nor does the arrangement amount to a direct cash transfer to African businesses.

The instrument is unfunded: the Bank provides risk protection rather than disbursing the full value of each supported trade transaction at the outset. The announcement does not identify a single aggregate facility amount, and none should be inferred from the continent-wide financing gap.

By reducing risk for an international confirming bank, the mechanism can support relationships with African banks that might otherwise face limits on available credit or transaction capacity. The intended beneficiaries include businesses whose trade depends on reliable access to banking services.

That is particularly relevant for smaller enterprises. Even commercially viable import and export orders can stall when firms cannot obtain suitable financing or when counterparties demand assurances that local banks struggle to provide.

The wider challenge is structural. African trade finance is shaped by bank balance sheets, country risk perceptions, compliance requirements, currency availability and the costs of processing transactions. A guarantee can address some risks but cannot resolve every constraint.

The agreement offers another example of development-finance institutions working through commercial banks rather than financing every end-user transaction directly. Its impact will depend on how many eligible transactions are supported, the sectors and countries reached, and whether smaller firms gain meaningful access over time.

Source: African Development Bank official announcement.