SBI and India Exim Bank filling trade financing gap in Africa

The event was initiated by Consul General of India Mahesh Kumar who said it is the first of a series of ongoing engagements with the IEF. “We did this to assist all companies doing trade or some form of other business with India in their capacity building because generally for bigger businesses they are able to sort out their trade financing needs. For smaller business, a lot of issues look very difficult and insurmountable and they find the complexities of the trade world very bewildering sometimes,” Kumar said.

CEO of State Bank of India (SBI) Ashutosh Kumar and Shyamashish Acharya, Resident Representative at the Johannesburg Representative office of India Exim Bank, both explained the benefits of using their services in dealing with import and export trade between India and the African continent.

“SBI is enabling India’s footprint in Africa, playing an important role in African trade by way of funding to South African banks through syndications,” Kumar said, adding that the bank had invested fresh capital and retained its earnings for the last 27 years in South Africa.

“SBI’s offerings include bilateral credit lines to multi-lateral institutions such as Afri-Exim, Africa Finance Corporation, and others. We also offer bilateral lines in the form of trade loans to the other major banks present in African countries,” Kumar said.

The CEO said such funding indirectly reaches smaller corporates in the African nations whereas direct reach would have been difficult.

“With various Indian corporates participating in the bid bonds in various project in Africa, we have ensured to establish reach in majority of the African nations through our correspondent bank,” Kumar said.

He said that SBI now caters to more than 40 nations on the African continent to help Indian corporates for their bank guarantee requirements.

Acharya shared how a trade facilitation initiative called Trade Assistance Programme (TAP) to contribute to reduction in the trade finance gap had integrated India’s economic engagement with its partner countries in a post-Covid world.

“The TAP provides support through credit enhancement to trade instruments, thereby enhancing the capacity of commercial banks to support cross-border trade transactions involving untapped markets where trade lines are constrained or where the potential has not been harnessed,” Acharya said.

He said that India Exim Bank was already operating in 31 African countries, the largest number on any continent after 17 in Asia, 15 in Latin America and 10 in Europe.

Among the African projects supported by India Exim Bank, Acharya cited one by CSM Technologies in Bhubaneswar to provide IT solutions and services for national identity documents rollout in Ethiopia and construction of electrical networks in Burundi by East India Udyog of Uttar Pradesh.

Acharya said his bank was also exploring the possibility of extending credit lines to several South African banks for projects in neighbouring states of Zambia and Zimbabwe.

SBI COO Kirti Kumar said SBI and India Exim Bank were not competitors but complemented each other in their activities.

The COO also said that the current initiatives at BRICS for settlement of debts in local currencies rather than currencies such as the USD would not impact its activities.

“How much trade between (the BRICS partners) will happen in USD remains to be seen, but as a banker it would hardly make any difference. We are already trading in several other currencies, so we will just add one more currency,” he said.