Analysing the widening Africa trade finance gap reveals a harsh reality on the ground for local manufacturers seeking to export goods across borders: viable trades are delayed or lost entirely not for a lack of willing buyers, but for a severe lack of working capital. When banks pull back from trade financing, the immediate consequence is a strangulation of cash flow that prevents businesses from procuring raw materials, covering import costs, and accessing regional markets. This tangible business paralysis occurs long before high-level policy frameworks or institutional announcements can take effect, trapping entrepreneurs in a cycle of missed opportunities.
The African Development Bank (AfDB) released its 2025 Trade Finance Report on May 28, 2026, during the Bank Group’s 2026 Annual Meetings in Brazzaville, Republic of Congo. The publication provides a comprehensive assessment of the continent’s trade finance landscape spanning the 2020–2024 period, examining the sector from a bank-intermediation perspective. For the first time, this report also measures exactly how much Development Finance Institutions (DFIs) contribute to trade finance throughout the region.
Institutional Retreat and the Africa Trade Finance Gap
According to the findings, the baseline Africa trade finance gap for unmet demand ranged between $74 billion and $92 billion in 2024. The AfDB says this gap narrowed slightly because of support from international development banks, governments, and export agencies. However, commercial banks have pulled back significantly. They handled only about 23% of Africa’s total trade over the last five years, a major drop from the 40% they managed between 2011 and 2019.
African micro, small, and medium enterprises (MSMEs) form the backbone of the economy, constituting roughly 90% of all businesses and providing at least half of total employment across the continent. Despite their vital economic role in driving shared growth, these enterprises face severe systemic exclusion from financial support. The overall bank rejection rate for trade finance applications remains stubbornly high at 37%, with SMEs bearing the brunt of these denials. Data shows that between 2013 and 2019, bank rejection rates for applications submitted by MSMEs doubled from 20% to 40%. By 2024, the approval rate for SME trade finance applications sat at just 63%, illustrating a persistent funding deficit for smaller firms.
While Africa’s formal merchandise trade experienced a robust recovery to $1.5 trillion in 2024, intra-African trade accounted for $220.3 billion, representing just 14.4% of total African trade. Crucially, this figure exclusively reflects formal trade activities, failing to capture the substantial volume of informal trade conducted across the continent. These informal enterprises, particularly those operating in rural communities and owned by women, encounter even stiffer financing difficulties, risking slower integration into continental markets while their real economic footprint remains hidden from official data.
Liquidity Bottlenecks and Cross-Border Mitigation
This development highlights a persistent structural barrier that fundamentally restricts Africa’s industrialization and economic integration. The estimated $74 billion lower-bound gap represents 5.4% of the region’s total merchandise trade value for 2024, carrying an immense opportunity cost for SMEs attempting to scale across borders. To track international credit metrics and check currency restrictions across different economic blocs, you can consult the official African Development Bank Group corporate portal to follow financial integration benchmarks.
The primary factor driving this barrier is an acute shortage of foreign exchange liquidity. Approximately 36% of surveyed banks identified limited foreign currency liquidity as the primary constraint limiting their trade finance growth between 2020 and 2024, a sharp escalation from the 18% of banks that cited this issue in the 2015-2019 period.
For SMEs, this macroeconomic foreign exchange barrier is worsened by strict institutional lending conditions. When attempting to secure investment funding, MSMEs are often blocked by excessive collateral requirements, which can demand at least twice the loan sum just to mitigate perceived credit risks. Furthermore, international banks continue to reduce their correspondent relationships in Africa due to high compliance costs, strict anti-money laundering regulations, and risk aversion. As domestic lenders remain constrained by risk capital and liquidity shortages, the issue persists, forcing small businesses to rely on expensive, short-term loans that must be paid back too quickly.
This financing problem directly impacts the operational success of major policy frameworks like the African Continental Free Trade Area (AfCFTA). While the AfCFTA provides immense opportunities to eliminate inhibitive regulations and ease cross-border trade, its preferential trade operations currently remain limited and are mostly associated with the Guided Trade Initiative. Without easily accessible and affordable capital, small firms simply do not have the capacity to maximize the benefits of a unified African market. The structural barriers preventing MSME financing are actively hindering the AfCFTA’s core objective of inclusive local industry growth.
To bridge this gap, policy mechanisms such as the Pan-African Payment and Settlement System (PAPSS) have been introduced to align financial infrastructure with trade goals. By allowing cross-border transactions to be settled directly in local currencies, PAPSS aims to significantly reduce reliance on external hard currencies. This alignment directly addresses the foreign exchange liquidity barrier that 36% of banks identified as their primary operational constraint, providing a much-needed systemic workaround.
The impact of this Africa Trade Finance Gap is uniquely severe for informal cross-border traders, who conduct a sizable share of regional commerce yet remain entirely outside the formal banking system. In a region where only 32% of the population has access to a formal bank account, these traders are excluded from bank-intermediated trade finance. They are often forced to rely on informal sources of funds that are costly and insufficient, making it nearly impossible for them to build assets, absorb global supply chain shocks, or transition their operations into the formal continental market.
Addressing the $74 billion to $92 billion trade finance gap requires deep systemic interventions, relying heavily on Development Finance Institutions (DFIs) and regional banks to shoulder the risk. Between 2020 and 2024, DFIs facilitated approximately $32 billion in trade finance annually, representing about 3% of Africa’s total merchandise trade. Without this critical intervention, the annual gap could have easily exceeded $100 billion. Institutions like Afreximbank are aggressive in their financing, disbursing over $17.5 billion in 2024 with a plan to double intra-African trade financing to $40 billion by 2026, though a recent downgrade by Fitch threatens to increase the cost of this vital financing.
Looking ahead, stakeholders must closely monitor the rollout and adoption of the PAPSSCARD, a joint initiative between Afreximbank, PAPSS, and Mercury Payment Services, which was launched in June 2025 during the 32nd Afreximbank annual meetings in Abuja, Nigeria. This instrument is designed to enable instant, secure, and affordable cross-border retail payments across Africa. If widely adopted, it could fundamentally bypass traditional correspondent banking bottlenecks, easing foreign exchange pressures and dramatically increasing real-time financial access for SMEs.
To close Africa’s trade finance gap, commercial banks must stop treating SME trade finance as a residual activity and instead build it out as a deliberate, core business line. Lenders must rapidly adopt digital trade finance solutions; currently, only 28% of banks utilize digital tools, largely due to high implementation costs and inadequate infrastructure. Regulators and DFIs need to share this burden by subsidizing digital infrastructure and expanding risk-sharing structures, such as the transaction guarantees already in use. Ultimately, scaling local-currency settlement systems like PAPSS is mandatory to bypass the foreign exchange shortages suffocating regional commerce.
Afreximbank Shifts Focus to Finance Regional Value Chains Across Africa
