Africa Finance Corporation (AFC) has partnered with Germany’s leading insurer, Munich Re, to sign a $1 billion managed debt mobilisation programme to expand trade finance for African banks.

In the first phase, the programme will cover 38 financial institutions across 11 African nations and provide risk-sharing support for trade loans, trade guarantees and commercial letters of credit that meet the given conditions.

The executive board member and head of financial services at Africa Finance Corporation, Banji Fehintola, said the deal became necessary because the traditional balance sheet lending could no longer cater to Africa’s financing needs 

Mr Fehintola stated, “Across the development finance landscape, there is a growing recognition that the scale of Africa’s financing needs cannot be met through traditional balance sheet lending alone.

“Multilateral development banks like AFC are increasingly embracing an originate-to-distribute model, with private capital mobilisation becoming central to how we deliver greater development impact. Managed debt mobilisation sits at the heart of this transition, enabling institutions like AFC to leverage our origination capabilities, structuring expertise and risk management frameworks to attract institutional capital at scale.”

He added, “The programme with Munich Re demonstrates how we can translate that ambition into practical, scalable solutions that expand financing capacity while optimising the deployment of our own capital. As the African Continental Free Trade Area deepens trade between African economies, the programme helps to solve committed capacity constraints for banks that finance that trade and strengthens AFC’s ability to be more instrumental in financing Africa’s development.”

The AFC’s deputy director and head of syndications, Wole Asase, stated that the arrangement slightly differed from previous agreements.

Mr Asase noted, “Munich Re has shared risk on AFC loans since 2018, one transaction at a time. This programme replaces that with pre-agreed risk parameters, so eligible trade finance transactions are covered automatically and banks get faster decisions.  

“Because the transactions are short-dated, the capacity is recycled as they mature, and the wider Managed Debt Mobilisation Program it anchors gives us a framework to bring in further institutional investors, whether as funders or risk partners.”