Trade Financing for Small and Medium Enterprises and the Africa Continental Free Trade Area: A Law and Economics Perspective

Abstract

The African Continental Free Trade Area (AfCFTA) has emerged as a contemporary and novel initiative aimed at advancing Africa's developmental agenda within the framework of the African Union's agenda 2063 and growing intra-African trade. AfCFTA's implementation objectives are set out in articles 3 and 4 of the AfCFTA Agreement and focus primarily on eliminating non-tariff and tariff barriers, trade facilitation, and investment promotion, among other relevant variables that might boost Africa's competitiveness in the global economic environment. The preamble of the AfCFTA Agreement's Protocol on Trade in Services places emphasis on the need to "to harness the potential and capacities of African services suppliers, in particular at micro, small and medium (SME) levels, to engage in regional and global value chains". To this end, the significance of trade financing in developing other African economies must provide the necessary capital to facilitate the establishment of businesses of all sizes - small, medium, and large - in order to stimulate the African economy's development and growth. In this article, it will be argued that the AfCFTA sees financial institutions, especially banks, as underpinning its trade finance policy execution. African countries therefore have to change their attitude towards trade financing which is often taken for granted on the continent.