In the case of a syndicated loan, the rights, obligations and obligations of the borrower and lenders are generally governed by a syndicated credit contract, while in the case of a risk-sharing transaction, the rights and obligations of the lender and the participant are governed by the Master Risk Participation Agreement. By selling the stake to the risk, the lender reduces its credit risk in the loan and adds another source of financing to the borrower in case the borrower needs additional resources. In addition, the sale of the initial lender`s units allows the lender to realize new capital, while the lender can use the proceeds of the sale for new credit opportunities. As noted above, the original lender`s interest in the lender in the risk-participation agreements is sold directly to the participant. With respect to risk participation, the lender cedes an economic interest to a member`s loan contracts, which allows the lender to benefit from an economic benefit under the loan agreement between the lender and a borrower. “This agreement is yet another attempt to scale and improve the bank`s partnership with sMBCE to better meet the continent`s commercial financing needs,” said Yaw Kuffour, The Bank`s Director of Trade Finance. Using the AfDB`s AAA rating, Absa will pay these commercial transactions. A spokesperson for the AfDB informs the GTR that it will include, among other things, letters of credit, pre-shipment credits and import credits, export and import invoices, as well as bonds and guarantees. The tone of the transactions will not exceed two years. Under the provisions of the RPP, the AfDB supports up to 50% of each underlying transaction, with this proportion reaching 75% in particular cases. Absa will confirm the transaction and will bear at least 50% of the underlying risk. There are several versions of a master participation contract.
The most widely used versions are the BAFT Master Participation Agreement, based on English law, and the International Trade and Forfaiting Association (ITFA) Master Participation Agreement, based on New York law. Tags: Absa Bank, Africa, African Development Bank (AfDB), Derisking, Pierre Guislain, Risk Participation Agreement, SME, Trade Finance Gap The initial BAFT Master participation agreement was launched in 2008. It is based on English law and should be the industry`s standard document for transactions to facilitate the purchase and sale of commercial financing assets worldwide. The Bankers` Association for Finance and Trade (BAFT) was founded in 1921 and is an international financial trade association that is held around the global financial community. Its membership consists of international financial institutions and companies that are actively involved in global and commercial financing. As part of the agreement, the Bank will extend a funded and unfunded three-year RPA limit to USD 200 million, which will allow SMEs to meet a total of USD 400 million to support a portfolio of eligible commercial financing instruments from 45 local and regional African banks operating in about 17 regional Member States. The bank`s additionality therefore lies in the use of its “AAA” rating to provide greater comfort to enable ABSA to increase its thirst for risk-taking for local banks in Africa and to provide them with increased trade finance facilities. This reinforces the expansion and deepening of Africa`s financial systems. The RPA is structured in such a way that small and medium-sized enterprises (SMEs) benefit from it, which is in line with the strategic orientation of the former RPP, which accounted for 83% of the use of SMEs.