Owing to long-term local funding and underdeveloped non-sovereign local bond, the African Development Bank (AfDB) is injecting $10 million equity investment in Africa Financial Sector Depeening Fund to strengthen the capital base of local financial institutions.
The investment in the Fund that is the Bank’s private sector window and managed by Adventis Ltd would also help in stimulating the Africa’s corporate bond market.
The investment would span over 10 years to address the growing demand among local financial institutions for Tier 2 capital and to deepen local currency capital markets.
According to the bank, the fund seeks to raise 100 million dollars by the first closing and 200 million dollars by the second closing.
“Given scarce long-term local currency funding and underdeveloped non-sovereign local currency bond markets, the fund will offer a significant private-sector demonstration effect by making sizable Tier 2 capital available to financial institutions.
“By leveraging capital structure and balance sheets, Tier 2 instruments will allow financial institutions to grow their lending and to scale up their long-term loan portfolio to support infrastructure, industries, and manufacturing, among other sectors, in the targeted economies.
“It will invest in mainly subordinated debt instruments issued by financial institutions, support bond issuances as anchor investors to be listed on local exchanges and crowd in local institutional investors.
In addition, the bank said that it would help to scale up investments in financial institutions to optimise and enhance their long-term capital base and develop local bond markets.
“Based on market opportunities, the fund has identified priority countries as Botswana, Ethiopia, Côte d’Ivoire, Kenya, Mauritius, Namibia, Rwanda, Tanzania, Uganda, Ghana and Zambia,’’ the statement said
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