Three Leading Development Finance Institutions Sign Loan Agreement to Support Capital Markets and High Impact Sectors in Africa
April 12, 2018
(OPIC)
US Overseas Private Investment Corporation (OPIC), the African Development
Bank, and KfW support to African Local Currency Bond (ALCB) Fund to focus on
housing, microlending, and agriculture projects
Frankfurt, Germany – Overseas Private Investment Corporation (OPIC), the
African Development Bank (AfDB) and ALCB Fund Board Members today signed a loan
agreement to support high impact sectors in Africa focusing on housing,
agriculture and SMEs.
OPIC contributed $40 million to the Fund while the African Development Bank is
providing a Senior Loan of $10 million to support the development of local
currency corporate bond markets in Africa. The latter loan was first local
currency financing obtained by the ALCB Fund. The Fund was incorporated in
December 2012 by the German Development Bank (KfW), with initial paid-in capital
of US $47 million.
Jim Polan, OPIC Vice President for Small and Medium Enterprise Finance; Pierre
Guislain, African Development Bank Vice President in charge of Private Sector,
Infrastructure and Industrialization; Vitalis Ritter and Mark Napier, Board
members of the African Domestic Bond Fund, signed the agreement.
Many local financial institutions and companies in Africa are new to capital
markets transactions and to working with institutional investors. The ALCB Fund
engages with financial institutions and companies at an early-stage of the
funding process, helping them to understand whether a bond issuance is the right
path and the process involved. It also seeks to address a number of challenges
in African capital markets, including limited primary issuances, price
transparency, and limited participation by local market investors.
“Capital markets in Africa are both a challenge and opportunity,” said
Polan. “This fund will have a tremendous impact by increasing the amount of
long-term local currency financing available to companies operating in impact
sectors. OPIC looks forward to working with its partners on this innovative fund
and facilitating sustainable economic opportunities in Africa.”
“The development of well regulated, deep, effective and liquid financial
markets in Africa is central to the African Development Bank’s strategy,”
said Pierre Guislain. “The contribution to the Fund complements our existing
initiatives aimed at mobilizing domestic savings and stimulating non-sovereign
debt capital markets for private sector growth across Africa. We welcome this
opportunity and are proud to partner with institutions from Germany, UK, US and
other African Development Bank Member Countries to finance Africa’s
Sustainable Development Goals and the Bank’s High 5 priorities agenda.”
"With the participation of OPIC and the African Development Bank, the ALCB Fund
has achieved two milestones. Firstly, it takes total committed funds to USD 180
million, maximizing the Fund’s investment reach on the continent and its
ability to mobilize domestic capital,” said Ritter, a Principal Project
Manager at KfW. “Secondly, through the African Development Bank, the Fund is
for the first time ever able to raise funding in a local currency from an
African institution. Through the ALCB Fund, institutions from Germany, the UK
and the US are joining forces with the AfDB to promote sustainable capital
market development in and for Africa.”
“The Board of the ALCB Fund and FSD Africa, on behalf of the UK government,
greatly welcome the African Development Bank and OPIC as partners to the
Fund,” said Napier, the Director of FSD Africa based in Nairobi. “These
loans re-affirm both of these important organizations’ strong commitment to
the development of long term finance markets in Africa and allow the Fund to
reach scale and maximize impact as an agent of change in African capital
markets.”
The OPIC loan will facilitate the Fund’s participation in approximately 10 to
14 local currency bond issuances for institutions operating in financial
inclusion, housing, agriculture, renewable energy and other developmental
sectors throughout Africa.
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