Exim Bank of India signs MoU with Afreximbank for $30mn LOC

Exim Bank of India today signed a memorandum of understanding (MoU) with African Export-Import Bank (Afreximbank) to extend a US$30 million line of credit (LOC) to finance Indian exports to Africa, during a session on finance at the CII- EXIM BANK Conclave on India Africa Project Partnership 2008 being held in New Delhi. The MoU was signed by Venkat Subramanian, CMD EXIM Bank of India, and Mr Jean-Louis Ekra, President, Afreximbank, in the presence of Dr D Subbarao, Secretary Finance, Government of India.

Dr Subbarao in his address said while free trade more than aid will assist Africa in their growth process, the African countries would need to strengthen their manufacturing and infrastructural sectors. Only then will external trade bring greater returns, he observed.

Noting that India requires US$500 billion for its own physical infrastructure development, Dr Subbarao said that Africa is a fellow traveler in the direction of core sector development. He added that Africa would need assistance in building both hard and soft infrastructure to power their agricultural and manufacturing sectors.

Dr Subbarao stated that while the Government of India LOCs have provided soft landing for Indian companies in Africa, the credit facilities have also contributed to local capacity building in African countries.

He expressed satisfaction over the 100% credit offtake via the LOC route but said that procedural delays had somewhat affected the rate of credit utilisation by the African states, adding that engagement of Indian consultants in pre- and post-project identification processes could help to enhance the credit utilisation rate.

Dr Subbarao also expressed hope that the African countries would provide more opportunities for Indian banks to operate in the region, and to be able to access the regional markets.

Reflecting on the special relationship with Exim Bank, Mr Ekra said he was happy that Exim Bank of India, which is a shareholder in Afreximbank, has gone beyond the role of a shareholder to deepen trade and economic links in Africa. He said the MoU signed today reflects the effort.

Regarding India-Africa trade ties, he said that limited cross-border information flows and limited trade financing facilities have been the key constraints in enhancing the trade flows. He added that India has a key role in financing Africa’s development projects, which may take the form of LOCs or FDI, which in turn would facilitate a higher level of technology transfers and local skills development initiatives. “We look for not just finance, but also technical and management expertise and market access support from India,” he said.

Prof Semakula Kiwanuka, Minister Of State For Finance, Planning And Economic Development (Investments), Uganda, in his address said that India could assist Africa in areas like microfinance development and promotion. He said this would complement Africa’s economies which are largely agrarian.

Inviting Indian entrepreneurs to invest in his own country Uganda, Prof. Kiwanuka said the East African market offers great scope for Indian investors. “The whole of Great Lakes region can be accessed from Uganda,” he said.

However, he pointed out that India-Africa trade ties will not grow until there is better connectivity between the two regions. He urged Indian investors to consider investing in the aviation sector to directly link India with Uganda.

He also said that Indian power companies could play a key role in Uganda’s, as also the region’s, power sector development. “Without sufficient energy, the manufacturing sector will not grow,” he stated.

Mr Mahesh Kotecha, President, SCIC, and Member, International Advisory Panel, East African Development Bank, urged Indian companies to invest in African small and medium sectors, particularly in East Africa.

Earlier, Mr Subramanian who moderated the session said that greater economic cooperation between India and Africa would depend on the financing of the businesses.

Sourced From: Confederation of Indian Industry