Africa Biz Construction and Business News
African Financial Fund Receives $10M Investment from AfDB
June 10, 2018
The Africa Financial Sector Deepening Fund, a financial instrument designed to strengthen the capital base of local financial institutions and stimulate Africa's corporate bond market, just received a US $10 million investment from the African Development Bank.
The Fund seeks to raise US $100 million by the first closing and US $200 million by the second closing and to invest over 10 years to address the growing demand among local financial institutions for Tier 2 (subordinated) capital and to deepen local currency capital markets.
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 to scale up investments in financial institutions to optimize 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.