African private sector infrastructure investment catalyst group, Africa Finance Corporation (AFC) and Germany-based global reinsurance, primary insurance and insurance-related risk specialist group Munich Re have announced that they have jointly created a $1-billion Unfunded Managed Debt Mobilisation Programme (UMDMP). The UMDMP ensures committed support for AFC’s loans to African financial institutions, intended for trade finance.

AFC and Munich Re have been working together since 2018, but hitherto it was a case of Munich Re sharing the risk, one deal at a time. A number of transactions have since been completed, including two this year. But the UMDMP replaced the previous deal-by-deal approach with a standing programme. The two institutions have agreed the risk parameters and limits upfront, meaning that Munich Re now automatically takes a share in eligible AFC transactions, while AFC retains part of the risk, in every case. Thus, both their interests are aligned.

The result will be that African banks will get more trade finance, faster. African banks currently need significant liquidity to finance both intercontinental and intra-African trade, noted the AFC. Such trade boosts African economies. The UMDMP will initially benefit 38 financial institutions in 11 African countries.

“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,” explained AFC executive board member and financial services head Banji Fehintola. “Multilateral development banks like AFC are increasingly embracing an originate-to-distribute model, with private capital mobilisation becoming central to how we deliver greater development impact. Managed debt mobilisation sits at the heart of this transition, enabling institutions like AFC to leverage our origination capabilities, structuring expertise and risk management frameworks to attract institutional capital at scale. 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.”

The UMDMP also provides a platform which enables other investors to take part, alongside the AFC, either by supplying funding or by sharing risk. The AFC is already in discussions with other institutional investors, both global and African, about providing funding via the platform. The transactions covered by the UMDMP are short-dated, and so, as they mature, the funding they received is recycled and becomes available to fund new investments.

"Munich Re benefits from the strong pan-African footprint of AFC while AFC benefits from the strong capacity of Munich Re,” pointed out Munich Re Global Credit Solutions head Herbert Müller. “The trust built between our two organisations 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."