Nigerian investment manager ARM has unveiled the ARM African Trade Finance Fund (AATFF), a new initiative aimed at expanding trade finance access for African small and medium enterprises (SMEs) by providing loans to banks across the continent. The fund, registered in Mauritius, will launch with $100 million in capital from an undisclosed development bank co-sponsor, with ARM covering setup costs.
Led by Chief Executive George Wilson, formerly head of institutional trade finance at Investec, AATFF will offer revolving credit facilities to African banks and non-bank providers to enhance their SME trade financing portfolios. Wilson emphasized competitive wholesale pricing to ensure profitability for lenders, targeting a 10% return through leveraged investments. The fund aims to grow to $300 million in three years and reach $1 billion within seven, with its first deal expected to close by November.
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The fund’s strategy focuses on providing liquidity to experienced lenders, mitigating risks associated with direct SME lending. Facility sizes will range from $100 million for tier-1 banks to smaller amounts for lower-tier and alternative providers. To secure loans, AATFF will leverage banks’ government bond holdings, including repo-style structures.
Wilson, a long-time advocate for improving African SMEs’ access to trade finance, highlighted the fund’s alignment with addressing the $2.5 trillion global trade finance gap, particularly acute in Sub-Saharan Africa due to high credit risk perceptions and stringent regulatory capital requirements. Many international banks have reduced credit lines to the region, exacerbating the challenge.
The initiative supports the UN’s recent call for an additional $4 trillion annually to meet Sustainable Development Goals, addressing underdeveloped financial markets and high capital costs. Established in 1994, ARM’s expertise in asset management and alternative investments positions AATFF to drive impactful economic growth across Africa.
