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The Africa Finance Corporation (AFC) and German reinsurer Munich Re have signed a US$1 billion risk-sharing agreement that lets AFC extend more trade finance to African banks, which in turn lend to small businesses trading across borders. The deal was announced in a statement dated October 26 and reported by The EastAfrican on October 31, 2026.
How the AFC–Munich Re trade finance deal works
The financing sits under AFC’s Unfunded Managed Debt Mobilisation Programme (UMDMP). In plain terms, Munich Re is not lending cash. It agrees to take on part of the default risk on AFC’s trade finance loans to African financial institutions:
- Munich Re automatically takes a share of every eligible AFC transaction.
- AFC keeps part of the risk on each deal, so both sides lose if a loan goes bad.
- With less risk on its books, AFC can lend more to banks without needing extra capital.
Why trade finance in Africa matters
Africa’s trade finance gap is estimated at US$80 billion to US$120 billion a year. Banks often struggle to get foreign currency and credit lines from international lenders, so importers and exporters, especially small firms, are turned away or charged high rates for letters of credit and guarantees.
The deal is pitched as support for the African Continental Free Trade Area (AfCFTA), a single market of about 1.3 billion people. Intra-African trade relies on banks confirming payments between countries, and that is where the shortfall bites hardest.
What it means for Kenyan businesses
Kenyan SMEs will not deal with AFC or Munich Re directly. Any benefit comes through local banks that tap AFC credit lines and on-lend. Kenyan lenders have been lining up similar facilities this year, such as the US$10 million AfDB trade finance line to Family Bank and the KSh1.3bn forex line for SMEs.
If you import or export, ask your bank whether it has a trade finance line from a development lender, and what it charges for letters of credit and import financing. Firms trading with Uganda, Tanzania or Rwanda can also benefit from the EAC MSME trade fair network to find buyers.
About the two partners
AFC is a Lagos-based multilateral financial institution that invests in infrastructure and industry across Africa. Munich Re is one of the world’s largest reinsurers, providing reinsurance, primary insurance and risk solutions.
Why reinsurance is used for lending
Development lenders such as AFC have limits on how much risk they can hold against their capital. By passing part of each loan’s risk to a highly rated insurer, they free up room to lend more on the same capital base. This “unfunded” approach has become common in development finance because it scales lending without new cash from shareholders. For banks borrowing from AFC, the practical effect should be larger and more reliable credit lines for confirming letters of credit and financing imports and exports, especially in US dollars, which many African banks find hard to source.
FAQ
What is the AFC Munich Re deal?
A US$1 billion risk-sharing agreement under which Munich Re covers part of the risk on AFC’s trade finance loans to African banks.
How big is Africa’s trade finance gap?
It is estimated at US$80 billion to US$120 billion a year.
Can a Kenyan SME apply to AFC for trade finance?
No. AFC lends to financial institutions. SMEs access the funds through their local banks.
Updated October 31, 2026.
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