ATI and USAID’s Southern Africa Trade Hub hosted a workshop in Blantyre on September 17, 2015 that attracted 40 representatives from the banking and finance sector of Malawi. The Trade Hub has been working to bring together Africa Trade Insurance Agency (ATI), the Agricultural Commodity Exchange of Malawi (ACE), and Malawi banks to make more finance available for farmers and traders who store their grains in ACE-accredited warehouses.
ATI is Africa’s export credit agency, which provides political and trade credit risk insurance products to reduce the business risk and cost of doing business in Africa. During the workshop, the Trade Hub facilitated ATI and ACE to form a new credit risk insurance policy that gives the commodity exchange of Malawi much more leverage to finance warehouse receipts. As a result of the deal, ATI has agreed to insure against non-performance (spoiled or disputed grain in third party warehouses) in the form of warehouse bond insurance.
Currently only one bank, First Merchant Bank, finances warehouse receipts and has been capped at a ceiling of US$6 million. With the new ATI insurance facility, more banks will be attracted to participating in WR finance, which will increase trade through Malawi’s Agricultural Commodities Exchange to potentially US$30-40 million.
Furthermore, following the workshop, the Reserve Bank of Malawi announced capital relief of 50% for banks that make use of ATI facilities. Instead of putting up 100% of the capital, banks will now only be required to lodge 50% of the value, reducing the risk and cost of finance for warehouse receipts. The financing and insurance developments facilitated by the Trade Hub are anticipated to have significant benefit for the agricultural industry in Malawi, increasing storage and structured trade.
Photo: Attendees at the Trade Hub-hosted workshop in September