Underwriting Trade Credit: An Enabler for Supply Chain Finance in Africa

Expanding trade credit as part of supply chain finance solutions across Africa involves more than capitalising on market opportunities. It requires navigating a complex and varied regulatory and operational landscape. This perspective reflects Credeq Africa’s experience in navigating the complexities of trade credit in relation to supply chain finance across African markets.

As an underwriting management agency, Credeq Africa underwrites trade credit insurance solutions on behalf of licensed insurers. These solutions are designed to help protect one of the largest assets on a company’s balance sheet – the debtor’s book and can be structured to allow cession to financial institutions, unlocking additional financial flexibility.

Regulatory challenges remain the primary barrier to market entry, explains Pieter van Zyl, Head of Market Engagement & Business Development at Credeq Africa. “For us as Credeq Africa, the largest barrier to enter the market is regulation. Some of the regulation requires the use of a local insurance party. So, understanding regulation is key.” Data privacy and cross-border data transfer requirements add further complexity, with differing rules across jurisdictions.

“Access to reliable and consistent data continues to present challenges in assessing credit risk. Asymmetrical information complicates the evaluation of counterparties, while annual financial statements are not standardised and may change over time.

“Credit bureaus are also not standardised, limiting the ability to build a consistent view of creditworthiness. In addition, high inflation can distort financial positions, as businesses and individuals may prioritise holding assets such as stock or property rather than cash,” adds Van Zyl.

Addressing these challenges requires a strong local presence. “In-country visits allow for the validation of financial information against actual operations, helping to align reported figures with on-the-ground realities.”

“From a Credeq Africa perspective, our role is to underwrite and de-risk the trade. Technology is only as good as the underlying data that feeds that tech. Data in Africa is not standardised. Therefore, technology is limited. We counter this with people in country,” explains van Zyl.

Risk considerations such as currency volatility, political conditions, and differing levels of legal enforcement further influence how trade credit solutions are structured and implemented.

The use of global credit risk insurance structures can support banks in optimising capital treatment, enabling them to free up balance sheets and extend liquidity further into the supply chain, particularly to SMEs.

“Where trade credit structures are in place, they can help de-risk exposures and support closer alignment in pricing, while increasing the level of security over debtor books. In this context, underwriting trade credit plays a critical role in enabling supply chain finance to function more effectively across African markets, particularly where regulatory, data and capital constraints persist,” van Zyl concludes.

ENDS

About Us

Credeq stands behind financial promises around the world. We are a leading global underwriting management agency headquartered in London, with local teams in South Africa, Australia, and Europe. We have a GBP 176 gross written premium with a presence across 8 different countries and 35+ years expertise in specialist credit insurance. Our expertise spans Guarantees & Surety, Trade Credit, Credit Risk Insurance and AI Risk. Credeq Africa (Pty) Ltd Is an Authorised Financial Services Provider (FSP 54862) Underwritten by Lombard Insurance Company Limited an Authorised Financial Services Provider (FSP 1596) and Insurer conducting non-life insurance business. For more information, visit: www.credeq.com