Multinational - African Local Currency Bond Fund (ALCB FUND)


Project Summary

Approval Date 31 Jan 2018
Signature Date 13 Apr 2018
Sovereign / Non-Sovereign Non Sovereign
Sector Finance
DAC Sector Code 24030
Commitment U.A 7,067,244.83
Status Implementation

Project General Description

The African Local Currency Bond Fund (ALCB Fund) aims to promote local capital market development, access to long-term local currency financing, and to crowd-in domestic institutional investors. It envisages extending a local currency Senior Loan of ZAR 140 million (USD 10m equivalent in ZAR) to ALCB Fund, with a term of 7 years including two (2) years grace period. The Fund invests throughout African countries and only in primary bond issuances by non-sovereign entities, focusing on high developmental sectors of financial institutions, renewable energy, housing, and agriculture. The proposed loan will include a two (2) year grace period followed by a five (5) year semi-annual repayment period and will be denominated and repaid in ZAR local currency. The African Development Bank will explore the most cost efficient option to mobilize the required ZAR based on the market conditions during execution/implementation through either the issuance of a ZAR bond in the domestic capital market or a cross currency swaps with market counterparty. Proceeds from the Bank’s Senior Loan will be utilized to grow the Fund’s local currency corporate bond portfolio of investments thereby creating opportunities for local African corporate issuers to access and diversify their long-term funding sources in local currency and to crowd-in local institutional investors. The proceeds of the loan shall be utilized by the Fund to grow its portfolio by acting as anchor investor in first time or innovate non-sovereign local currency bond issuances in the high development impact sectors.

Project Objectives

The objective of the Fund is to facilitate local currency corporate bond market development through (i) anchor investments of up to 30% of new bond issues; (ii) crowd in critical local private and institutional investors; and (iii) technical assistance, via a USD 2.59m ALCB Fund Technical Assistance Facility-“Fund TAF”.

Beneficiaries

The Fund’s ultimate beneficiaries are predominantly micro, small and medium enterprises (MSMEs) and private lower income households, in addition to the provision of access to long-term capital in local currency which is critical for the sustained growth of private enterprises thereby supporting job creation, and is aligned with the Bank’s TYS by promoting inclusive growth.

Participating Organization

Funding
African Development Bank

Information

IATI identifier 46002-P-Z1-HB0-057
Last Update 25 Jul 2019

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Contact Details

Email private-sector@afdb.org

Geographic Location

Country Multinational