The African Development Bank (AfDB) has approved a $100m unfunded Risk Participation Agreement (RPA) between the AfDB and Commerzbank AG under which the two banks will share the default risk on a portfolio of qualifying trade transactions originated by issuing banks in Africa and confirmed by Commerzbank AG, AfDB said in a statement.The facility will help address critical market demand for trade finance in Africa by providing support for trade in vital economic sectors such as agribusiness and manufacturing, the statement added."It will foster financial sector development, regional integration and increase government revenue generation ultimately improving Africa’s sustainable economic growth,” the bank said."The majority of African banks have small capital bases which constrain their ability to obtain adequate trade limits from international confirming banks and to undertake sizeable transactions that have significant development impact.”It is noted that despite the growth in trade risk distribution globally, local banks in Africa have not significantly benefitted from this growth. AfDB’s additionality lies in the use of its "AAA” rating to share trade risk and expand the trade finance capacity of banks in Africa, thereby expanding trade and strengthening regional integration.The RPA facility will run for a three-year period and is 50/50 risk sharing deal that will enable Commerzbank AG to match AfDB’s undertaking in every transaction, thereby creating a maximum portfolio of up to $200m.The facility will result in the provision of significant support to African banks and SMEs. Counting roll-overs, it is expected to facilitate about $1.2b of trade in equipment, raw materials, intermediate and finished goods over the three-year period.The proposed facility aligns with AfDB’s regional member countries’ priorities to promote trade as reaffirmed by the African Union in January 2012. It is also in line with the bank’s 10-year strategy and regional integration strategies which seek to consolidate its engagement in trade finance in Africa.Headquartered in Frankfurt, Germany, Commerzbank AG is a leading provider of trade finance in Africa with a trade portfolio of approximately of USD 6 billion and an active network of over 500 correspondent banks on the continent.Commerzbank AG captures significant trade flows in Africa and it is one of the leading European banks in terms of LC issuance and reimbursement in Africa.It has six representative offices in Africa located in Cairo, Tripoli, Addis Ababa, Lagos, Luanda, and Johannesburg.