Africa Has a $92 Billion Trade-Finance Problem. Tanzania Just Got $10 Million.

The African Development Bank has agreed to provide a $10 million guarantee to Exim Bank Tanzania to help local companies obtain trade finance, but the relatively small facility highlights the scale of the funding constraints facing African businesses seeking to trade across borders.

The transaction guarantee, signed on Sept. 28, will provide up to 100% cover to confirming banks against non-payment risks arising from letters of credit and similar trade-finance instruments issued by Exim Bank Tanzania, the AfDB said on Tuesday.

The facility will target small and medium-sized enterprises and local corporates involved in imports and is intended to support trade within Africa and with international markets.

“This facility is in line with the African Development Bank’s Cardinal Points on managing risk and mobilising capital, unlocking SME financing, as well as enhancing Africa’s regional integration and elevating its role in global markets,” Mary Monyau, AfDB’s Tanzania country manager, said at the signing in Dar es Salaam.

Exim Bank Tanzania Chief Financial Officer Shani Kinswaga said the agreement would expand the bank’s ability to finance trade while helping companies participate in regional and international markets.

“This partnership represents more than a financing arrangement; it strengthens the financial infrastructure required to support Tanzania’s growing trade ambitions. For Exim Bank, it provides an important opportunity to deepen our trade finance business while supporting Tanzanian businesses to participate more confidently in regional and international markets.”

The guarantee comes as Tanzania’s trade flows expand but companies continue to face difficulties securing the foreign currency, bank guarantees and correspondent-bank support needed to complete cross-border transactions.

World Bank trade data shows Tanzania imports substantially more goods than it exports. The country recorded about $15.1 billion in merchandise imports against exports of roughly $7.3 billion in the latest data, leaving a goods trade deficit of about $7.8 billion. Goods and services imports were equivalent to about 21% of gross domestic product, compared with exports of about 17%.

That makes trade finance particularly important for Tanzanian importers, but also exposes the limits of relying on guarantees alone. A guarantee can reduce the risk faced by a confirming bank, allowing more letters of credit to be confirmed, but it does not itself create dollars, working capital or productive capacity.

The AfDB’s latest trade-finance research found that unmet demand across Africa stood at between $74 billion and $92 billion in 2024. The lower estimate represented 5.4% of the continent’s merchandise trade. The bank said foreign-exchange liquidity shortages had become the biggest obstacle to expanding trade finance, with 36% of banks citing limited FX liquidity as their primary constraint between 2020 and 2024.

The same report found that commercial banks intermediated an average of only 23% of Africa’s trade during 2020-2024, down from 40% in 2011-2019. That suggests the problem is not simply a shortage of creditworthy borrowers but also limited balance-sheet capacity, foreign-exchange liquidity and risk appetite among banks and their international correspondents.

For Tanzania, the challenge is especially relevant to smaller businesses. AfDB research on Kenya and Tanzania has identified trade-finance shortages as a constraint on SMEs’ ability to participate in international trade, while earlier AfDB and Afreximbank estimates put Africa’s unmet trade-finance demand at $81.8 billion in 2019.

The new facility is also not the first AfDB intervention of its kind in Tanzania. In April 2025, the development bank provided a $7.5 million transaction guarantee to Bank of Africa Tanzania to support trade finance for SMEs and local companies involved in imports.

The repeated use of guarantees points to a structural weakness in the market. Rather than banks simply needing more customers, they need international institutions willing to absorb part of the counterparty and country risk that makes African trade transactions harder and more expensive to finance.

AfDB’s transaction guarantee is an unfunded instrument, meaning the bank does not immediately disburse the full $10 million. Instead, it provides risk cover to confirming banks if an eligible transaction is not paid. The facility can therefore support a larger volume of underlying trade transactions than its headline value, depending on utilisation and the transactions ultimately backed.

That leverage is the strongest argument for the deal. By absorbing non-payment risk, AfDB can potentially encourage confirming banks to support Tanzanian letters of credit that might otherwise be rejected or priced too expensively.

But the size of the facility also illustrates the limitations of individual interventions. Africa’s $74 billion-$92 billion trade-finance shortfall dwarfs the $10 million guarantee, while AfDB’s research warns that renewed geopolitical tensions, supply-chain disruptions and tighter correspondent-bank risk appetite could push the continental gap to between $86.6 billion and $102.6 billion by 2027.

The problem extends beyond Tanzania. Africa’s intra-African trade remains relatively low compared with trade with the rest of the world, even as the African Continental Free Trade Area seeks to create a single market across 55 countries. AfDB has estimated that intra-African trade accounted for 34% of bank-intermediated trade between 2020 and 2024, an increase from pre-pandemic levels, suggesting that banks can play a growing role in regional integration if financing constraints are addressed.

The AfCFTA’s potential is substantial, with the trade agreement covering a market of about 1.3 billion people and combined economic output of roughly $3.4 trillion, according to AfDB. Yet the agreement cannot by itself overcome the practical barriers faced by companies trying to move goods across borders, including access to trade credit, foreign exchange, payments infrastructure, logistics and reliable correspondent banking relationships.

The immediate question is whether the guarantee generates additional trade rather than simply shifting existing transactions onto a guaranteed balance sheet.

If Exim Bank uses the facility to bring smaller importers and exporters into formal trade-finance channels, the impact could extend beyond the $10 million headline figure. If the facility mainly substitutes for transactions that the bank would have financed anyway, its development impact would be more limited.

The agreement nevertheless comes at a time when development banks are increasingly using guarantees rather than direct lending to mobilise private capital. AfDB agreed a $150 million trade-finance risk participation facility with the Eastern and Southern African Trade and Development Bank in 2024, while its wider trade-finance programme has supported thousands of transactions through African financial institutions.

For Exim Bank Tanzania, the facility should reduce the risk attached to trade-finance transactions and potentially allow it to deepen relationships with SMEs and larger companies. For AfDB, it offers a relatively capital-efficient way of supporting trade without funding the full value of every underlying transaction.

But Tanzania’s trade-finance challenge will require more than risk guarantees. Greater foreign-exchange liquidity, stronger regional payment systems, deeper local-currency financing, improved credit information and lower cross-border transaction costs will be needed if SMEs are to become meaningful participants in intra-African trade.

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