In our ?5 Questions? series, we ask partners in the AFTS ecosystem to share about their work and unique perspective on fintech. This ?5 Questions? interview is with Admassu Tadesse, President & Chief Executive of Trade and Development Bank (TDB).
Briefly, can you describe the focus and scope of TDB?s work in Africa?
Established in 1985, the Eastern and Southern African Trade and Development Bank (TDB) is a specialized, multilateral, treaty-based development financial institution, with assets of USD 6 billion.
TDB provides a spectrum of lending and non-lending products and services in the multi-sectoral universe of trade finance and socio-economic development, across project, corporate and infrastructure financing. Our geographic scope is limited to eastern and southern Africa. The spectrum ranges from short to medium and long-term financing. We are also active in asset management, where we co-manage special purpose funds.
The Bank approaches its interventions in a manner that pro-actively supports sustainable development, including the reduction of climate risks and expansion of clean energy ? in line with the Paris Agreement and SDG commitments linked to environmental protection. To date, 70% of TDB?s energy portfolio is in renewables and half of its overall portfolio, directly and indirectly, contributes to SDGs.
In 2018, TDB piloted an inclusive women- and youth-focused financing in Burundi, Ethiopia, Kenya, Malawi, Zambia and Zimbabwe. Can you tell us more about this initiative and how it aligns with the Africa 2063 agenda and the U.N. SDG goals?
Our SME pilot program has several thrusts to improve access to finance by women and youth SMEs, among others. Using partial guarantees and direct funding, we support microfinance institutions and other financial institutions to formulate and put in place appropriate funding structures for SME finance that incorporate first loss tranches, guarantees, collateral waivers and concessional funds to crowd in and leverage private sector funds, for scaling up and deepening reach as well as technical assistance to support SMEs to increase capacity to manage well their scaling up efforts.
Access to finance and capacity building are key elements in the development financing arrangements supporting job creation and enterprise development.
You were the recipient of the 2019 edition of the prestigious ?The African Banker of the Year? award. Can you tell us how TDB has grown under your tenure?
I joined the Bank in 2012 and led the development of a new strategy of growth, market and partner expansion, diversification, institutional strengthening, deep reforms, innovation and capital restructuring. In the 7 years since, the Management Team has executed the strategy quite well, and the results speak for themselves. The Bank’s equity capital and annual profits have grown four-fold to USD 1.2 billion and USD 130 million, respectively; assets have grown five-fold to USD 6 billion. Non-performing loans have dropped sharply to a record 2.35%, and the Bank has received several credit ratings upgrades from Fitch, Moody?s and GCR, crossing into investment-grade territory for the first time in 2017.
The Bank attracted 15 new shareholders, including several pension funds, insurance companies and specialist financial institutions, as well as 5 new Member States, and many more are in the pipeline. Several new long-term funding partners from Asia, Europe, and the US joined our stable of funders. We have also managed to issue several new global bonds and regional syndicated loans, including in the EU, China, Japan, India, and the Gulf region in the form of a sukuk. The Bank has delivered USD double-digit returns, and paid dividends consistently for several years, with dividend yields ranging between 3%-4%. Also, the Bank successfully introduced a suite of new e-systems, automation as well as new dedicated departments and business initiatives, including risk management, treasury, syndications, ECA finance, agency services, asset management and a new Academy. It is fair to say the Bank has shot out the lights in terms of its strategy and corporate plan targets.
How does TDB foresee fintech impacting trade, finance and infrastructure financing in Africa?
Fintech provides a convenient platform of innovative solutions such as blockchain and artificial intelligence to ease trade flows and reduce the turn around time of complex infrastructure transactions among distant and diverse parties. Such platforms enhance the transparency and security of data collection and dissemination, enabling banks to execute swift transactions and to become more efficient, agile and profitable.
TDB is committed to adopting and promulgating Fintech solutions. A good example is a recent TDB Trade Finance transaction that closed using blockchain technology, the first of its kind within the African DFI community. This kind of transaction will save the Bank significant time and expenses and provide our clients the satisfaction of speed of delivery.
Fintech will enable more financial inclusion necessary to create value and improve the quality of life in Africa. Sooner than later, fintech will be the catalyst to bridge the development gap and leapfrog Africa into a more sophisticated and modern society.
Why are you excited to partner with the Africa Fintech Summit in Addis Ababa?
We are pleased to partner with the Africa Finch Summit in Addis Ababa as we believe that innovation is very important in expanding access to finance and reducing the cost of finance. It is also the case that Addis Ababa is a Member State of TDB.