The African Development Bank (AfDB) board of directors, has approved $10 million for the African Local Currency Bond Fund (ALCB Fund), to further enhance the Fund’s portfolio and promote the development of domestic capital markets across the continent.
The senior loan, which has a seven-year tenor including a two-year grace period, will support opportunities for local African corporate issuers to access and diversify their long-term funding sources in local currency and crowd in local institutional investors.
The ALCB Fund was incorporated in December 2012 by the German Development Bank (KfW) on behalf of the German Federal Ministry of Economic Cooperation and Development.
It is licensed as an open-ended Fund, domiciled in Mauritius with initial paid-in capital of $47 million.
Promoting local currency bond issuers
The Fund is designed to promote local currency bond issuers in high-impact sectors by providing technical assistance to facilitate corporate bond issuances and champion best practice across various domestic debt markets.
Geographically, the Fund is expected to invest in all African countries where local currency bonds are possible.
So far the Fund has invested in Botswana, Ghana, Kenya, Zambia, Lesotho, Senegal, Côte d’Ivoire, Nigeria, Uganda, Malawi, Gabon and Togo.
According to the AfDB, as of 31 December 2017, the Fund had made 27 investments across 19 companies and in 10 currencies.
The products and services offered by the ALCB Fund are designed to improve access for non-sovereign issuers for long-term funding in local currency, reduce currency and maturity mismatches and increase local financial intermediation.
The Fund will catalyse investments in critical sectors such as renewable energy, housing, health, education, the financial sector and agriculture. Read more…
The transaction also provides an opportunity to leverage the Bank’s financing through ALCB Fund’s co-investments with local institutional investors such as pension funds and insurance companies; thereby amplifying the scope and impact investments.
The Bank’s contribution to the Fund will complement existing initiatives to mobilise domestic institutional savings and stimulate non-sovereign local debt capital markets development across Africa. This will ultimately help grow private sector financing through capital markets.
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