Bridging Africa's Trade Finance Gap

Africa's trade finance gap (the difference between the huge demand for funding for cross border trade and the actual supply thereof), is estimated at approximately $100-120 billion annually, representing a critical barrier to economic growth, particularly for small and medium-sized enterprises (SMEs) that constitute 80-90% of businesses on the continent. This shortfall limits SMEs' access to credit for imports, exports, and supply chains, stifling intra-African trade — which stands at just 14-15% of total trade — and hindering the African Continental Free Trade Area (AfCFTA) ambitions. Traditional banks, constrained by risk aversion, Basel IV regulations, and high capital requirements, often retreat from high-risk sectors, leaving a void that private trade finance funds are increasingly filling in 2025.

Private funds close this gap by offering flexible, tailored financing solutions that banks cannot match. These funds tolerate higher risks, enable quicker executions, and customize terms for SMEs in trade-dependent sectors such as agriculture, manufacturing, and commodities. Funds like the Eastern and Southern African Trade Fund (ESATF), managed by TDB Group with USD 414 million in assets, was launched in 2019 with only USD 50m, evidencing the need and the demand to close the trade finance gap in the SME sector, as well as the scale-ability thereof.

Digital innovation amplifies the funds’ impact: Platforms integrate technology for real-time transactions, alternative data for credit assessment, and supply chain finance to unlock liquidity in multi-currency environments, reducing reliance on USD and mitigating volatility. A notable 2025 initiative is British International Investment's (BII) USD 50 million facility with Ghana International Bank, targeting SMEs in seven frontier markets (Sierra Leone, Liberia, Gambia, Benin, DRC, Rwanda, and Tanzania) by providing letters of credit and guarantees, bypassing commercial banks' limitations. This has doubled trade volumes, supported cross-border efficiency and enhanced AfCFTA integration.

Despite hurdles like regulatory barriers and fraud risks, private funds mobilize local liquidity and blend with development finance institutions for de-risking. In September 2025, the Intra-African Trade Fair held in Algiers, recorded a record of USD 48.3bn signed trade and investment deals, a sign of very good things to come for Africa's economic landscape.