To strengthen the capital base of local financial institutions and stimulate Africa’s corporate bond market, the African Development Bank (AfDB) has approved a US$10mn investment through its private-sector window in the Africa Financial Sector Deepening Fund being managed by Adventis Ltd as the fund manager
The Fund seeks to raise US$100mn by the first closing and US$200mn by the second closing and to invest more than 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 provide 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.
