The World Bank today announced the approval of $110 million in credits to help seven African countries to reduce poverty by providing access to political risk insurance that could stimulate private sector-led growth and cross-border trade.
According to the World Bank, financing for productive activities in Africa is severely constrained by a perception of high political risk in the region as a whole, and also in individual countries. The project aims to address this problem by setting up a credible insurance mechanism against losses caused by political risks.
As part of this effort, the project includes start-up funds for the Africa Trade Insurance Agency -- a new international institution aimed at providing financial instruments and services to support trade and investments in Africa.
"Some African countries are working hard to improve their business climate, and this project will help increase the availability of credit for viable commercial transactions that increase private sector activity and hard currency flows to the region," said project team leader Onno Ruhl.
Burundi, Kenya, Malawi, Rwanda, Tanzania, Uganda and Zambia will initially benefit from the initiative, which is called the Regional Trade Facilitation Project, but Mr. Ruhl predicted that its reach could expand. "Although we are currently just working with seven countries, the project can be extended to cover all African countries," he said.