(Ecofin Agency) - In addition to creating jobs and boosting economic activity, the agreement will unleash the full potential of small and medium-sized enterprises in extra- and intra-African trade.

China Development Bank (CDB) will loan $400 million to small and medium-sized enterprises (SMEs) in Africa. The news was disclosed on August 28, 2023, by the African Export-Import Bank (Afreximbank).

The agreement was signed by AfreximBank Chairman Benedict Oramah and CDB President Tan Jiong at AfreximBank's headquarters in Cairo, Egypt.

Under this agreement, Afreximbank will deploy, over seven years, directly or via intermediaries, a financing mechanism aimed at SMEs involved in extra- and intra-African trade and those engaged in the productive sectors in its member states, the press release states.

Although the borrowing terms have not been revealed, Benedict Oramah said they will be "relatively affordable" and that the financial benefit will be transferred in price and duration to the final beneficiaries.

"This facility further strengthens the strategic partnership we have developed with China Development Bank over the past six years, which has seen CDB make three previous interventions in support of our work at AfreximBank," he added.

In sub-Saharan Africa, SMEs account for almost 90% of all businesses and 38% of regional gross domestic product (GDP), according to data provided by the World Bank. Despite their weight in the economy, these entities face difficulties in accessing financing and credit, due to the informal status of the majority of them. Before the COVID-19 pandemic, the International Finance Corporation (IFC), a member of the World Bank Group, estimated the financing gap faced by African SMEs at $331 billion, with banks being the most reluctant financial partners.

Bank loans account for just 11% of financing received by micro, small, and medium-sized enterprises (MSMEs), according to the report "Africa MSME Pulse Survey 2023 ", published last February by GeoPoll, in collaboration with Africa 118.

Charlène N’dimon (intern)