This text was produced with the assist of ECOWAS Financial institution for Funding and Improvement
The personal sector in west Africa is poised for a recent increase after the ECOWAS Financial institution for Funding and Improvement (EBID) and the African Commerce & Funding Improvement Insurance coverage (ATIDI) inked an settlement to assist financial exercise within the area.
Signed on the sidelines of the African Improvement Financial institution annual conferences in Abidjan, the memorandum of understanding (MoU) gives a basic framework for the 2 establishments to collaboratively de-risk personal sector transactions in West Africa.
This new partnership is about to reinforce efforts to draw personal funding to the area, with a concentrate on increasing industrial capabilities, accelerating infrastructure growth, and constructing regional worth chains.
“In partnering with ATIDI, the Financial institution takes one more step in the direction of enhancing its danger administration technique, which can allow it to safe aggressive assets to finance transformative growth tasks throughout West Africa,” stated Dr George Agyekum Donkor, President and Chairman of the board of administrators of EBID, through the signing ceremony.
Mitigating dangers
Dr Donkor highlighted the assorted macroeconomic pressures dealing with nations within the area, outlining challenges similar to debt misery, excessive funding prices, excessive non-performing loans within the personal sector, and the specter of credit score downgrades by credit score scores companies.
“Non-public sector non-performing mortgage (NPL) ratios in some nations have reached 15-20% resulting from numerous pressures, far above world averages,” he elaborated.
He additionally cited safety and political challenges within the area, noting that this had adversely impacted the danger profile of some nations. “As a DFI [development finance institution], EBID invests in areas the place many business financiers would hesitate. Our goal is just not solely to drive affect however to take action sustainably whereas incomes the belief of world markets. To this finish, credit score danger insurance coverage is just not a luxurious – it’s a necessity,” he stated.
“Partaking companions like ATIDI to supply credit score insurance coverage choices helps to mitigate the challenges talked about by decreasing the Financial institution’s publicity to sovereign default danger whereas strengthening its danger administration framework, which interprets into higher capital adequacy and extra steady asset high quality,” he added.
Manuel Moses, CEO of ATIDI, welcomed the partnership, stating that ATIDI “will spare no effort to make the partnership a dynamic, prolific and profitable one.”
“This MoU represents a concrete step in the direction of enhancing entry to finance for the personal sector, notably for SMEs [small and medium enterprises] that are the spine of Africa’s financial system,” he stated. “Importantly, the MoU displays the necessity for strategic collaboration amongst key gamers in growth finance. Solely by pooling their belongings can establishments similar to EBID and ATIDI attain the size the place they’ll obtain their deliberate growth affect and allow transformational funding for the good thing about ECOWAS residents,” he added.
Increasing the mortgage guide
The MoU comes at a time when EBID has considerably grown its mortgage guide. In 2024, the Financial institution disbursed $473.8m – 24% of its stability sheet – a major improve from 16.5% the earlier yr. As of 2024, EBID had disbursed a cumulative $2.3bn on to SMEs, girls entrepreneurs, and main industrial tasks, creating over 1m jobs.
In April, the Board of Administrators of the Financial institution authorized $230m and XOF 10bn for strategic regional initiatives, together with a $50m credit score line to Sterling Financial institution Nigeria to assist SMEs throughout sectors similar to well being, schooling, and renewable vitality; a XOF 10bn facility to Benin Cashew SA to co-finance cashew nut processing; and a $180m facility to Mota-Engil Nigeria for the Kano-Maradi rail line, a significant hyperlink between Nigeria and Niger anticipated to generate over 100,000 jobs throughout development and 20,000 everlasting positions thereafter.
Dr Donkor expressed confidence that the MoU with ATIDI would assist maintain this momentum by de-risking transactions and crowding in extra financing from the personal sector.
“Credit score danger insurance coverage offers us the instruments to take calculated dangers. It’s my hope that this partnership will develop our attain and allow us to finance West Africa’s future.”
“West Africa is on a path of transformational progress. With a inhabitants set to exceed 500m by 2040, and urbanisation driving new infrastructure, vitality, and digital calls for, the strain to finance sustainable growth has by no means been larger,” he added.
Based in 2001 by African states with assist from the World Financial institution, ATIDI gives political danger, credit score, and surety insurance coverage to mitigate dangers for firms doing enterprise in Africa. As of 2024, its devices had helped facilitate commerce and investments over $88bn in Africa. Over time, the establishment has maintained stellar credit score scores, having secured an A/steady score for monetary energy and counterparty credit score by S&P and an A2/constructive score from Moody’s.
“We assist mitigate actual and perceived dangers, providing buyers the safety they should transfer ahead with tasks and investments in Africa. We work carefully with worldwide and native stakeholders, each private and non-private, to create an setting of belief and stability, finally making Africa a extra enticing funding vacation spot,” Moses advised African Banker in a latest interview.
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