How Currency Risk Management Can Boost Access to Trade Finance in Africa

Access to trade finance is one of the most significant binding constraints to the growth of African trade. Across Africa, this constraint has been exacerbated by a shortage of US dollar liquidity, since the dollar remains the preeminent currency used to settle trade transactions. This paper argues that if development finance institutions increase the supply of synthetic local currency trade finance instruments, this could shield companies from risks associated with currency depreciation and boost both access to trade finance and economic growth in Africa.