Why Africa requires homegrown trade finance to boost economic integration

Africa’s quest to trade with itself has never been more urgent. With the African Continental Free Trade Area (AfCFTA) operational, governments are working to deepen intra-African commerce.

The idea of “One African Market” is no longer aspirational; it is emerging as a strategic pathway for economic growth, job creation, and industrial competitiveness.

Yet even as infrastructure and regulatory reforms advance, one fundamental question remains: how will Africa finance its cross-border trade, and how can businesses transact confidently across markets with diverse currencies, regulations, and standards?

Today, only 15 to 18 per cent of Africa’s trade happens within the continent, compared to 68 per cent in Europe and 59 per cent in Asia. Closing this gap is essential if AfCFTA is to deliver prosperity to Africa’s 1.3 billion people.

A major constraint is the continent’s huge trade finance deficit, which exceeds $81 billion (Sh10.53 trillion) annually, according to the African Development Bank. Small and medium-sized enterprises (SMEs), which provide more than 80 per cent of the continent’s jobs, are the most affected.

Many struggle with insufficient collateral, stringent risk profiling and compliance requirements that mirror international banking standards rather than the realities of African business.

External shocks

To build integrated value chains, exporters and importers must operate within trusted, predictable, and interconnected financial systems. This requires strong pan-African financial institutions with both local knowledge and continental reach. 

Homegrown trade finance is therefore indispensable. Pan-African banks combine deep domestic roots with extensive regional reach, making them the most credible engines for financing trade integration.

By retaining financial activity within the continent, homegrown lenders reduce exposure to external shocks and keep liquidity circulating locally.

They also strengthen existing regional payment infrastructure, such as the Pan-African Payment and Settlement System (PAPSS), developed by the Africa Export-Import Bank (Afreximbank) and backed by the African Continental Free Trade Area (AfCFTA) Secretariat, enabling faster, cheaper and seamless cross-border payments across the continent.

Digital transformation amplifies this advantage. Real-time payments, seamless Know-Your-Customer (KYC) verification, automated credit scoring and consistent service delivery across markets are essential for intra-African trade.

Institutions such as Ecobank, operating in 34 African countries with integrated core banking systems, demonstrate how such digital ecosystems can enable continent-wide commerce.

Trust, however, remains a significant barrier. Cross-border commerce depends on the confidence that partners will honour contracts, deliver goods as promised, pay on time, and present authentic documentation.

Traders often lack reliable information on potential partners, operate under different regulatory regimes, and exchange documents that are difficult to verify across borders.

This heightens the risk of fraud, non-payment and contractual disputes, discouraging businesses from expanding beyond familiar markets.

Technology is closing this trust gap. Artificial Intelligence enables lenders to assess risk using alternative data for SMEs without formal credit histories.

Distributed ledger tools make shipping documents, certificates of origin, and inspection reports tamper-proof.

In addition, supply-chain visibility platforms enable real-time tracking of goods and cross-border digital KYC ensures that both buyers and sellers are verified before any transaction occurs.

Digital marketplace

Ecobank’s Single Trade Hub embodies this trust infrastructure by offering a secure digital marketplace where buyers and sellers can trade with confidence, even in markets where no prior relationships exist.

The platform’s Trade Intelligence suite provides customers instant access to market data from customs information and product classification tools across 133 countries.

SMEs need more than financing. Many operate in cash-heavy cycles where suppliers and logistics providers require upfront payment.

Lenders can support these businesses with advisory services, business intelligence, compliance guidance, and platforms for secure partner verification, contract negotiation, and secure settlement of payments.

Trade fairs, industry forums, and partnerships with chambers of commerce further build the trust networks needed for cross-border trade.

Ultimately, Africa’s path toward meaningful trade integration begins with financial integration. AfCFTA’s promise will only be realised when enterprises can trade with confidence, knowing that payments will be honoured, partners verified, and disputes resolved.

This requires collaboration between banks, regulators, and trade institutions, alongside harmonised financial regulations, interoperable payment systems, and continent-wide verification networks.

Africa can no longer rely on external actors to finance its trade.

Its economic transformation depends on strong, trusted and digitally enabled African financial institutions that understand the continent’s unique risks and opportunities.

By building an African-led trade finance ecosystem, the continent can unlock liquidity, reduce dependence on external currencies, empower SMEs, and retain more value locally.

Africa’s trade revolution will accelerate when its financing is driven by African institutions, African systems, and African ambition.

 - The writer is the director, corporate and investment banking, Kenya and EAC at Ecobank Kenya