AfDB 2025 Trade Finance Report: Commercial Bank Retreat and DFI Intervention Define Africa’s Post-Pandemic Financing Architecture
The African Development Bank’s fifth Trade Finance Report, released during the Bank Group’s 2025 Annual Meetings in Brazzaville on 28 May 2026, documents a structural realignment in how African trade is financed: commercial banks are intermediating a shrinking share of the continent’s trade, while development finance institutions have absorbed the gap at a scale that raises urgent questions about long-term sustainability and institutional design.
Commercial Bank Retreat: A Structural Shift, Not a Cyclical Dip
Between 2020 and 2024, commercial banks intermediated an average of 23% of Africa’s total trade, down sharply from 40% recorded during the 2011-2019 period. That 17-percentage-point contraction is not attributable solely to pandemic disruption. It reflects deeper structural constraints, including tightening correspondent banking relationships, foreign exchange liquidity shortfalls, and risk-aversion among global financial institutions operating in African markets.
Foreign exchange liquidity has emerged as the dominant constraint. 36% of surveyed banks cited limited foreign exchange liquidity as their primary barrier to trade finance growth during 2020-2024, compared with 18% in the 2015-2019 period. That doubling in the proportion of affected institutions points to a systemic deterioration in the operating environment for African commercial banks, not isolated institutional weakness.
For West African economies, this matters acutely. Countries operating outside the CFA franc zone, including Ghana and Nigeria, have experienced severe foreign exchange volatility over the review period. Ghana’s cedi depreciation and Nigeria’s multiple exchange rate regimes have complicated correspondent banking relationships and elevated transaction costs, directly suppressing commercial bank participation in trade finance.
DFI Substitution: Filling the Gap or Crowding Out Reform?
Development finance institutions, including the AfDB, the International Finance Corporation, and regional bodies, facilitated approximately US$32 billion in trade finance annually between 2020 and 2024, accounting for roughly 3% of Africa’s total merchandise trade. Without that intervention, the AfDB estimates the annual trade finance gap would have exceeded US$100 billion during the same period.
The report’s data confirm that DFI support was decisive in preventing a collapse of trade flows during the pandemic years. But the scale of substitution raises a governance question that the report begins to address: when DFIs systematically replace commercial banks, do they suppress the market development and regulatory reform that would attract private capital back into the sector?
Didier Acouetey, Senior Advisor to AfDB President Sidi Ould Tah for the Private Sector, pointed toward a framework answer. “NAFAD gives us, for the first time, a coherent continental framework to close the trade finance gap, not project by project, but systemically,” he said, referencing the New African Financial Architecture for Development. NAFAD’s design, if implemented with fidelity, is intended to shift the DFI role from gap-filler to market-builder, using blended finance and risk-sharing instruments to crowd private capital in rather than substitute for it.
Whether African governments and regulatory bodies will align domestic financial sector policy with NAFAD’s architecture remains the operative institutional question.
Intra-African Trade Finance: AfCFTA’s Financing Prerequisite
One data point in the report carries particular weight for the AfCFTA agenda. Between 2020 and 2024, intra-African trade accounted for 34% of total bank-intermediated trade, an 89% increase above pre-pandemic levels recorded during 2011-2019. That growth is significant. It suggests that African banks are increasingly orienting their trade finance operations toward continental rather than extra-continental flows, which aligns structurally with AfCFTA’s integration objectives.
AfCFTA, which entered its operational phase in 2021, targets the elimination of tariffs on 90% of goods traded among member states and the progressive liberalization of services. But tariff reduction alone does not generate trade. Trade finance, the letters of credit, guarantees, and payment instruments that underpin cross-border commercial transactions, is the operational infrastructure without which AfCFTA preferences cannot be monetized by firms.
The 89% increase in intra-African bank-intermediated trade is therefore not merely a financial sector statistic. It is a measure of AfCFTA’s financing readiness. The fact that commercial banks are simultaneously retreating from overall trade intermediation while expanding their intra-African exposure suggests a deliberate reorientation, but one that remains fragile given the foreign exchange and correspondent banking constraints documented elsewhere in the report.
SME Exclusion: The Governance Failure Inside the Gap
Within the aggregate trade finance gap, the report and accompanying panel discussion identified a specific institutional failure: the systematic exclusion of small and medium-sized enterprises from trade finance systems. Francisca Tatchouop Belobe, African Union Commission Commissioner for Economic Development, Trade, Tourism, Industry and Minerals, framed the problem with precision: “SMEs are too large for microfinance, too small for corporate banking, but far too commercially important to be left outside the trade finance system. It is time for commercial banks to treat SME trade finance as a deliberate, core business line, not a residual activity.”
SMEs account for the majority of formal employment across West Africa and represent the primary vehicle through which AfCFTA trade liberalization would generate broad-based economic benefit. Their exclusion from trade finance is therefore not a niche access-to-finance problem. It is a structural barrier to the distributional outcomes that give AfCFTA its development rationale.
Regulatory frameworks in most West African jurisdictions have not yet created the incentive structures, risk-sharing mechanisms, or credit guarantee architectures that would make SME trade finance commercially attractive for banks. The ECOWAS Trade Finance Facilitation Program and the AfDB’s own trade finance instruments have made incremental progress, but the AU Commissioner’s language, “deliberate, core business line,” implies that voluntary bank reorientation is insufficient without regulatory mandates or sufficiently structured incentives.
Digital Infrastructure Deficit and the Correspondent Banking Constraint
The report introduces digitalization as a new analytical dimension, and the findings are sobering. Only 28% of surveyed banks reported having adopted digital tools or platforms for trade finance operations. High implementation costs and inadequate technological infrastructure are the primary barriers. Among banks that have adopted digital solutions, 49% report improved processing speed and efficiency, confirming the productivity case for investment.
The low adoption rate has direct implications for correspondent banking relationships. Global correspondent banks apply increasingly stringent compliance and due diligence requirements to their African counterparts. Digitalized documentation, automated compliance screening, and electronic trade instruments reduce the risk premium that global banks attach to African transactions. Without digital infrastructure, African banks remain structurally disadvantaged in maintaining and expanding correspondent relationships, which in turn constrains their capacity to intermediate trade.
Mehdi Tanani, Regional Director for Central Africa at Proparco, connected the digital and resilience agendas directly: “Africa will not close its trade finance gap by adding constraints, but by building a more resilient, more digital, and more sustainable trade finance ecosystem, one that protects SMEs against global shocks while accelerating the continent’s economic integration.”
Geopolitical Risk and the Fragility of Recent Progress
AfDB Macroeconomic Policy, Forecasting and Research Department Director Anthony Simpasa issued a specific quantified warning. Under a moderate to severe scenario of tightening correspondent bank risk appetite, the trade finance gap could widen to US$86.6-102.6 billion by 2027, potentially erasing a decade of progress in narrowing the gap.
That scenario is not hypothetical. Renewed geopolitical fragmentation, disruptions to global supply chains, and the reconfiguration of Western financial institutions’ emerging market exposure following successive crises have already begun to manifest in reduced correspondent banking coverage in several African markets. For West Africa specifically, the combination of political instability in Sahel states, currency volatility in major economies, and the de-risking behavior of global banks creates a compound vulnerability that no single DFI intervention can fully offset.
The AfDB report’s data and the panel discussion it generated point toward a coherent policy agenda: African central banks and finance ministries must accelerate foreign exchange market reform to reduce liquidity constraints; regulatory bodies must create structured incentives for SME trade finance; governments must invest in digital financial infrastructure as a public good; and continental institutions, the AU, ECOWAS, and the AfDB itself, must operationalize NAFAD and AfCFTA financing mechanisms with the urgency that the gap data demands. The US$32 billion annual DFI contribution is a stabilizer, not a substitute for the institutional architecture that would make African trade finance commercially self-sustaining.
