With the global trading system emerging from the impact of Covid-19, the financial instruments and products that are used by companies to facilitate international trade and commerce – are becoming ever more important.
Trade finance revenues for the world’s top transaction banks were up by 10% in 2021 and are set to grow further this year, after almost a decade of decline or stagnation, according to figures from research company Coalition Greenwich. The world’s 10 largest transaction banks posted a combined revenue of $6.3bn from trade finance in 2021, up from $5.7bn in 2020, surpassing pre-pandemic levels.
In the second half of 2021, banks’ trade finance revenues grew by 13% year on year, driven in part by higher post-pandemic trade volumes and banks efforts to finance trade on behalf of SMEs, according to S&P Global.
Maximising opportunities created by AfCFTA
The story in Africa is no different. In May, Ade Ayeyemi, Chief Executive Officer of Ecobank Group, expressed the bank’s “intent to be the preferred trade bank for sub-Saharan Africa” in order to help Africa’s businesses and economies to “maximise the huge opportunities created by the African Continental Free Trade Area (AfCFTA).”
The CEO was speaking at the 34th Annual General Meeting of Ecobank Transnational Incorporated, the parent company of the Ecobank Group, in Abidjan, Côte d’Ivoire, where it was revealed that for the first time since 2016, shareholders of Ecobank will receive a dividend amounting to 0.16 cents per share.
Part of that success was attributable to a strong growth in the Group’s trade finance and services products. Ecobank was recognised at the GTR 2022 Leaders in Trade Awards as the Best Trade Finance Bank in West Africa (see box above) for its achievements in commodity finance, trade services, e-Trade volumes, intra-African trade facilitation, supply chain finance and its multi-currency payment capabilities.
Record-high commodity prices have triggered increased margin requirements from central clearing counterparties which has led to higher demand for financing among commodity traders, according to Fitch Ratings. In Africa, there has been a positive impact on commodity trade.
Ecobank’s affiliates in Côte d’Ivoire, Burkina Faso, Ghana, Nigeria, Benin, Togo, Guinea Bissau and Mali led arrangements and participated in multiple campaign financing facilities covering cocoa, cotton, soya beans and cashew nuts value chains for a total of c. $350 million.
Ecobank also participated in a farmers’ input programme consisting of financing the procurement by farmers of seeds, fertilisers, and pesticides necessary to sustain their farming.
Total value of Letters of Credit issued by Ecobank across its 15 affiliates covering Francophone West Africa, Nigeria and Anglophone West Africa regions grew 61% to $2.7 billion last year. In this respect, Ecobank has increasingly leveraged on its Paris-based affiliate, Ecobank International, for LCs confirmations, payments, and discounts in favour of beneficiaries.
The bank’s offering in trade services products has been facilitated by its robust e-Trade electronic module nested under its OmniPlus platform, allowing importers and exporters to initiate and monitor their trade transactions from the convenience of their office location.
Supply chain finance
Leveraging on its network’s advantage and multicurrency payment capabilities across its 33 banking affiliates across the continent, Ecobank has been focused on improving commercial relationships and trust among buyers and sellers, distributors and anchors, based on risk-mitigating trade instruments and focusing on improved collection processing efficiency, lower overall transaction costs, readily available information and greater ease of account management or monitoring via its state-of-the-art digital platforms.
GTR Leaders in Trade Awards
Category: Best Trade Finance Bank in West Africa
At the GTR 2022 Leaders in Trade awards Ecobank was recognised for its work in trade finance, taking home the award for Best Trade Finance Bank in West Africa.
The award comes in recognition of Ecobank’s solutions covering trade services, domestic and regional supply chain financing across key trade corridors, as well as the bank’s arranger roles and participation in key soft commodities campaign financing across West Africa. The judges also recognised Ecobank’s Trade Services solutions, which have enabled the Bank to command a significant market share of Letters of Credit across the continent, leveraging on its Paris-based affiliate, Ecobank International and other partners.