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The Economics of Structured Trade Finance in Africa

In: The Palgrave Handbook of International Trade and Development in Africa

Author

Listed:
  • Joshua Yindenaba Abor

    (University of Ghana Business School)

  • Kanayo Awani

    (African Export-Import Bank (Afreximbank))

  • Daniel Asante-Amponsah

Abstract

Structured trade finance is an important means of export and import financing, which focuses on transaction-based lending. The technique originated from the Latin American financial crisis in the mid-1980s and has since been seen as an innovative means of financing international trade. This financing does not rely solely on balance sheet analysis, government guarantee, and tangible assets as collateral but rather relies on the potential sale of the commodity for payment. Structured trade finance is particularly beneficial to developing countries, where there is limited access to conventional commercial finance. This chapter examines the economics of structured trade finance in Africa. It starts with a discussion on the evolution of structured trade finance. The chapter then explains what structured trade finance is, identifies the types of structured trade finance products, and shows how structured trade finance differs from conventional finance. It discusses the various structured trade finance instruments. It discusses the benefits of using structured trade finance and the challenges associated with it. The chapter also illustrates Africa’s experiences in structured trade finance and indicates the conditions for enhancing the use of structured trade finance in Africa.

Suggested Citation

  • Joshua Yindenaba Abor & Kanayo Awani & Daniel Asante-Amponsah, 2024. "The Economics of Structured Trade Finance in Africa," Springer Books, in: Matthew Kofi Ocran & Joshua Yindenaba Abor (ed.), The Palgrave Handbook of International Trade and Development in Africa, chapter 0, pages 159-177, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-65715-3_9
    DOI: 10.1007/978-3-031-65715-3_9
    as

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