Caricom proposes regional ex-im bank, initiates data collection
Caricom has released documents from the 22nd meeting of the Restricted Council for Finance and Planning, known as COFAP, which hammered out a proposal to establish a regional export and import bank in collaboration with Afreximbank.
The proposal aims to locate more financing for trade, supported by finance guarantees by African Export-Import Bank, also called Afreximbank or Banque Africaine d’Import-Export.
Exim banks, as noted by COFAP, provide as much as 20 per cent financing for foreign trade in many countries. The resolution to do the feasibility studies during the June 26-30 meetings followed on the 44th meetings of the Caricom Conference of Heads of Government held in The Bahamas in February 2023.
Caricom held talks with President and Chairman of the Board of Directors of Afreximbank Professor Benedict Oramah, in September 2022, who then offered to work with governments of Caricom, a trade bloc of 15 Caribbean countries, to set up a Caribbean Exim bank. Oramah also promised an investment of US$700 million in the Caribbean.
A report highlighting US$1 billion in trade opportunities between the African and Caribbean region was released at the same time.
In its current update, COFAP said the Caricom Secretariat has received offers of grant financing to conduct the requisite studies on the feasibility of a Caricom Export-Import Bank. But the document is already touting it as a means of expanding the range of export financing products and risk management practices available to Caricom exporters, while a separate technical presentation said such a regional policy institution would serve as “a financial anchor to the trade and economic development agenda of Caricom”.
The discussions regarding the regional bank are happening within the context of a deceleration in trade growth within the Caribbean, in tandem with deteriorating economic activity globally.
“The huge trade finance gap requires public interventions through export-import banks,” Caricom’s technical document noted.
“A Caribbean Exim could offer a range of export financing products, including direct loans, lines of credit, and buyer financing. Furthermore, an Exim can provide guarantees to help exporters manage the risk of non-payment and increase their competitiveness,” it said.
“A Caribbean Exim would help governments to support inclusive trade. Trade finance and SDGs are closely linked, promoting sustainable agriculture, empowerment of women, sustainable industrialisation, as well as innovation of small and medium-sized enterprises. A Caribbean Exim could be a key player for the just transition to net zero (carbon emissions).”
However, the regional trade also noted that there are impediments to expanding both intra-regional and extra-regional trade beyond the issue of trade financing.
As such, the conduct of the feasibility study will involve four phases which will require inputs from member states’ finance and trade officials, either during the data collection phase or the validation of the results of the study.
Caricom members were urged to be cooperative with the secretariat’s data collection drive.
Afreximbank, a pan-African multilateral financial institution, was created under the auspices of the African Development Bank in 1993 and is headquartered in Cairo, Egypt.
Afreximbank functions as a financial provider to African governments and private businesses in support of African trade. At the end of 2022, its total assets and guarantees for the institution stood at US$31.1 billion, and shareholder funds at US$5.21 billion.