LAGOS, Oct 27 – Africa Finance Corporation (AFC), the pan-African development finance institution, has agreed a $1 billion trade finance risk-sharing programme with German reinsurer Munich Re, aiming to expand financing available to African banks supporting domestic and international trade.
The Unfunded Managed Debt Mobilisation Programme (UMDMP) provides committed risk-sharing support for AFC’s trade finance lending to 38 financial institutions across 11 African countries. The initial phase covers commercial letters of credit, trade loans and trade guarantees, instruments commonly used by banks to finance imports and exports.
Under the arrangement, AFC and Munich Re have agreed risk parameters and limits in advance, allowing Munich Re to automatically assume an agreed share of eligible transactions. AFC will retain part of the risk on each transaction, aligning the interests of both institutions.
Unlike a conventional funding facility, the programme provides risk protection rather than directly supplying $1 billion in cash. By sharing eligible credit exposures, it is intended to help AFC extend its financing capacity and support transactions that might otherwise be constrained by banks’ risk limits.
The programme’s capacity will also be recycled as transactions mature, allowing the institutions to support new trade finance operations without requiring the entire risk-sharing allocation to remain tied to completed transactions.
Both parties may expand the programme’s scope over time to include additional financial instruments and sectors.
AFC shifts towards broader private capital mobilisation
The agreement forms part of AFC’s wider effort to mobilise institutional capital through risk-sharing arrangements rather than relying exclusively on its own balance sheet to finance development.
Banji Fehintola, AFC executive board member and head of financial services, said the programme reflected a broader shift among development finance institutions towards an originate-to-distribute model, in which institutions originate and structure transactions while bringing in external investors to provide funding or assume risk.
“Across the development finance landscape, there is a growing recognition that the scale of Africa’s financing needs cannot be met through traditional balance sheet lending alone. Multilateral development banks like AFC are increasingly embracing an originate-to-distribute model, with private capital mobilization becoming central to how we deliver greater development impact.” Fehintola said.
“This programme with Munich Re demonstrates how we can translate that ambition into practical, scalable solutions that expand financing capacity while optimising the deployment of our own capital. As the African Continental Free Trade Area deepens trade between African economies, the programme helps to solve committed capacity constraints for banks that finance that trade and strengthens AFC’s ability to be more instrumental in financing Africa’s development.” He added.
Wola Asase, deputy director and head of syndications at AFC Captive Insurance Company Ltd, said the arrangement would replace a transaction-by-transaction risk-sharing process with a standing programme based on pre-agreed conditions.
“Munich Re has shared risk on AFC loans since 2018, one transaction at a time. This programme replaces that with pre-agreed risk parameters, so eligible trade finance transactions are covered automatically and banks get faster decisions. Because the transactions are short-dated, the capacity is recycled as they mature, and the wider Managed Debt Mobilisation Program it anchors gives us a framework to bring in further institutional investors, whether as funders or risk partners.” Asase said.
AFC said it was in discussions with other African and international institutional investors about participating in its broader Managed Debt Mobilisation Program, either by providing financing or sharing risk.
Partnership builds on cooperation since 2018
The agreement builds on a relationship between AFC and Munich Re that began in 2018, when the reinsurer started sharing risk on AFC loans through individual transactions. The institutions have completed several transactions since then, including two in 2026.
The new programme formalises that cooperation into a standing arrangement, enabling eligible trade finance transactions to receive risk-sharing support under previously agreed parameters.
Herbert Müller, head of global credit solutions at Munich Re, said the arrangement would allow both institutions to use their respective capabilities more efficiently.
“Munich Re benefits from the strong pan-African footprint of AFC while AFC benefits from the strong capacity of Munich Re. The trust built between our two organizations through our cooperation since 2018 has allowed us to move from a transactional to a programmatic approach which allows us to support African financial institutions efficiently at scale. We see African trade as a long-term opportunity, and this programme gives us an efficient way to grow our business and improve our diversification at the same time alongside a trusted partner.” Müller said.
Risk-sharing arrangements can help financial institutions extend lending by transferring part of the potential losses associated with eligible transactions to insurers or reinsurers. This can create additional room for trade finance without requiring the originating lender to retain the full exposure on its balance sheet.
For African banks, the availability of such support could help address financing constraints affecting importers and exporters, although the actual volume of additional trade finance will depend on eligible transaction demand, underwriting conditions and participating institutions’ lending decisions.
AFC expands its insurance and risk-management capacity
The programme follows AFC’s establishment in August 2026 of AFC Captive Insurance Company, a wholly owned subsidiary based in Bermuda and backed by up to $30 million in equity capital.
The captive insurer allows AFC to retain and manage more risk internally, while the UMDMP enables the corporation to share eligible exposures with Munich Re and potentially other institutional partners.
Together, the initiatives form part of AFC’s effort to use insurance and structured risk transfer to deploy its capital more efficiently and increase its capacity to finance infrastructure, trade and other economic activities across Africa.
The $1 billion programme establishes a framework for risk-sharing across the initial group of financial institutions. Its broader impact will depend on how much eligible lending it supports, whether additional investors join the platform and whether the arrangement is expanded beyond its initial instruments and markets.
