AfDB Pre-TICAD7 Seminar
By External Representation Office for Asia

Financial Sector
Development
Department (PIFD)
Mr. Kazuhiro Numasawa
November 29, 2018

Outline

1.
2.
3.
4.
5.

OutlineAfrica Overview
Recent Investments
AfDB’s Financial Sector Development
AfDB’s Non-Sovereign Products &Projects
Q&A
2

Outline

1.
2.
3.
4.
5.

OutlineAfrica Overview
Recent Investments
AfDB’s Financial Sector Development
AfDB’s Non-Sovereign Products &Projects
Q&A
3

Overview ofAfrica’s Economic Growth Trend

Stable Growth around 4%4

Africa’s Regional Growth TrendEast and North Regions Higher
than Africa Average

5Inflation Rate Across Regions

CFA Zone(Pegged with EUR)
6Impact of FX Rate Move for FDIs in Africa

Short Term

1 year: 3% moving range

Kenya (KSH/USD)Long Term
Kenya (KSH/USD)

5 year: FX
moved by15%

1 year: 5% moving range

Mozambique (MZN/USD)

5 year: FX
moved by
Mozambique (MZN/USD) 100%7

Outline

1.
2.
3.
4.
5.

OutlineAfrica Overview
Recent Investments
AfDB’s Financial Sector Development
AfDB’s Non-Sovereign Products &Projects
Q&A8Financial Sector Department Investmentsin Africa (2018)
The department
Lending andInvestment in 2018
Since 2002, the AfDB has committed
approximately USD 10bn to 100+
institutions via well managed andcontinuously monitoredinterventions.

In 2018 the projected lending of the department isapproximately USD 1,6 Billion and channeled
support to priority sectors to support High 5
agenda.
Breakdown By
Window

Breakdown by Region (UA M)
106.0
9%

UA 787 Mil

211.0
18%

26

84

235.5
20%

Guarantee

LoC
394

366

RPA

229

451.8
38%

TF-LOC
ADB-NSO

ADB-SOV

RDGC
RDGE
RDGN
RDGS
RDGWRDNG

Regional Classification (UA M)
498.7
42%

Senior Loan

13.0
1%

245.2
21%

UA399
MilEquity88

Multinational

121.8
10%

478.7
40%

Fig1: Breakdown by Instruments

10.4
1%

LIC
MIC
N/A9Examples of transactions in 2018
1. USD 100 and ZAR 1.3 billion to Industrial Development
Corporation (financial closure during AIF on Nov 7,2018)6.

The use of the Bank's Partial Credit Guarantee (PCG). PCG
to the Senegal for cross-currency swap (USD vs EUR) for a total ofEUR 470 million

2. USD 10 million to Africa Financial Sector DeepeningFund (AFSDF) committed by AfDB (open for otherinvestors before the 1st close)

7.

Thematic Line of Credit to Support Sterling Bank in Nigeria
to boost its investments in renewable energy and agriculture inrural areas of Nigeria.

3. USD 10 million equity investment in Off-Grid Fund along 8.
with USD 20 million debt (1st close completed August
2018 with USD 58 million)
4. Equity participation supporting Venture Capital. UA 6 mil(appx USD 9 mln) in Partech Africa Fund under The BoostAfrica Initiative (USD 50 mil) in partnership with the EIB tosupport a new generation of African entrepreneurs.

9.

Trade Finance Line of Credit to Banco Angolano deInvestimentos (BAI) for USD 100 Million

Risk Participation Agreement to ABSA Bank for USD 250
Million to support its trade finance activities across Africa

5. The Launch of the African Domestic Bond Fund: AfDB’sinvestment (USD 25 million) The first enhanced ETF dedicatedto African domestic bond markets.

On-Going Initiatives at the Department
 The African Financial Markets Initiative (AFMI) – Supported by FAPA (Government of Japan)
The African Domestic Bond Fund (ADBF)African Bond Markets Development Index (ABMDI)
AfDB/AFMISM Bloomberg® African Bond Index (ABABI)
www.Africanbondmarkets.org

The Africa SME Program: support local financial institutions to expand lending to SMEs

The Boost Africa Initiative: promote VC/PE supporting local entrepreneurs and technology
companies
Making Finance Work for Africa Partnership (MFW4A): Africa’s financial sector knowledge
platform (www.mfw4a.org)

10Outline

1.
2.
3.
4.
5.

OutlineAfrica Overview
Recent Investments
AfDB’s Financial Sector Development
AfDB’s Non-Sovereign Products &Projects
Q&A
11

The Financial Sector Development Department
Financial
Intermediation &Inclusion

Capital MarketDevelopment

Trade Finance

Non-Lending activities

Investment in FinancialInstitutions (commericalbanks, leasing companies,PEs, etc.

Capital market instruments
and advisory to regulators,
stock exchanges, marketlinkages, etc.

Risk-Participation (i.e.
Risk sharing)
Trade Finance Liquidity
Commodity FinanceMarket Research,
Technical Assitance,
Donor Fund Managementetc.

Lines of credit

Direct equity investments

Senior & subordinated debtPartial risk & creditguarantees

Direct equity investments

Co-financing



Risk ParticipationAgreementsTrade Finance Line ofCredit

Debt, guarantees andEquity Investments
Credit enhancements
products (PCGs)
Risk Management
products (PRCs)
Credit enhancement on
structured products
Bond Guarantees
Advisory services

Soft Commodity
Finance Facilities







Africa Financial Markets
Initiative (AFMI)
Making Finance Work for
Africa (MFW4A)
Technical AssistanceFunds:
Africa Digital Financial
Inclusion Fund (ADFI)
Migration andDevelopment Fund(MDF) and Microfinance
Capacity Building Fund(MCBF)
Sector Strategies andStudies

12Co-Investment Opportunities
with African Development Bank
Investment Opportunities
Africa Financial Sector Deepening Fund (AFSDF)
An innovative funding mechanism to support financial institutions across Africa to capitalize their Tier2 capital to enhancetheirfuturegrowth.
(AfDB’scommitment
USD
10million,fund’starget
USD
100million)

Boost Africa Fund

Is part of the Boost Africa Initiative (co-designed with the EIB) to support the next generation of African entrepreneurs. The
initiative has three components: i) a Fund of Funds investing in a wide range of VC/PE segments; ii) EUR 20M TechnicalAssistance Facility; and iii) Innovation Lab.
 A layered capital structure fund with EUR 50 M first loss tranche from the EU (IRR caped at 3%)
 Raised EUR 150 M; target to raise EUR 50.



Off-Grid Energy Fund (Facility for Energy Inclusion)

USD 58 million committed by several investors including AfDB (USD 10 million equity) along with Nordic Development Fund,GEF, Calvert Impact Capital to promote off-grid energy solution providers across Africa by using mobile payment technologies
and home-solar systems.

The African Domestic Bond Fund (ADBF) The first enhanced multinational ETF dedicated to African bond markets.
Initial fund size: 200 M. The AfDB invested USD 25 M., and targets to raise a further USD 175 M.

13

Outline

1.
2.
3.
4.
5.

OutlineAfrica Overview
Recent Investments
AfDB’s Financial Sector Development
AfDB’s Non-Sovereign Products &Projects
Q&A
14

NON S0VEREIGN FINANCING PROJECT ELIGIBILITY CRITERIA
Africa-based project
Commercially viable
Development impact: Households benefits, infrastructure, government,
macroeconomic resilience, gender and social effects
Strong additionality
Environmentally sound, supports gradual transition to green growth
Sound procurement

15

Standard Private Sector Loans

Line of Credit• Eligibility: Private Sector Companies
in all Regional Member Countries(RMCs)
andnon-sovereignguaranteed public entities RMCs.
• Maturity: up to 15 years including a
5year grace period

Project Finance• Currency: EUR, USD, ZAR, JPY andany African lending currency
approved by the Bank through thelocal currency loan program• Pricing: Floating base rate + Lending
marginCorporate Loan

• For ZAR, additional margin to Base
Rate to reflect funding cost above
JIBAR.
• A free option to change the floatingbase rate into fixed base rate

16

AfDB’s Local Currency LoansRATIONALE:
GUIDING PRINCIPLES Reduce clients foreign
 African Currency
exchange risk
fundraising activity is Provide long term
demand driven
funding in local
 Fundraising is on acurrencies
back-to-back structure Introduce benchmark  Pricing is based on costissuances and rolepass throughmodel transactions
methodology, client Introduce a new asset
benefits from AfDB
class and allow forcompetitive pricing
diversification
 Promote domestic
capital market
development

The Bank currently has 10 approved African lending currencies:
Egyptian Pounds, Uganda Shilling, Nigerian Naira, Kenyan Shilling,
Zambian Kwacha, Tanzanian Shilling, Ghanaian Cedi, BotswanaPula, CEMAC region CFA and WAMU region CFA.

BWP

ZMW

EGP

XOF

XAF

UGX

TZS

NGN

KES

GHS

FUNDING METHODS Domestic bond issue Cross currency swap
 Synthetic Local
Currency Loans17Trade Finance
The USD 100mn RPA allowed ADB to shares credit risk (50/50) on a portfolio of trade transactions
with Sumitomo Mitsui Banking Corporation (SMBC) Europe (SMBCE).

ADB activity
1
2

ADB approves limits
for issuing banks
following SMBCE’s
proposals

3

SMBCE binds ADB
through RPA (notransaction approvalrequired)

SMBCE Submits
monthly reportdetailing ADB
exposure

Issuing
Banks

Exporter

Importer18

A/B Loan Syndications – Regional examples
LAKE TURKANAUSD 965 Million
A-Loan USD 10mm•••••••••

B-LoanBank of China USD 150mMUFG USD150m
Caixa Bank USD 100m
Citi USD 50m
HSBC USD 100m
JPMorgan USD 115m
KFW-Ipex Bank US$100m
Siemens Financial USD 50m
StanChart Bank US$150m

Preferred Creditor Status to benefit
commercial lenders

ZAR 2.703 Billion
USD 410 Million

EUR 275 Million

A loan EUR 115m

A-Loan AfDB – ZAR 2.703Bn• Triodos EUR 5.5m B-Loan• AfDB EUR 20m Sr. Loan / Ekf
Euros 20mm Gtee
• Proparco Eur 50m Sr. Loan
• FMO Eur 35m Sr. Loan)• PTA Bank EUR 10m Sr. Loan
• DEG EUR 20m Sub Loan
• AfDB EUR 5m Sub Loan
• EADB EUR 5m Sub Loan
• PTA Bank EUR 10m Sub Loan•••••

B-LoanBank of China USD 90m
MUFG USD 70m
SMBC USD 110m
Mizuho USD 90m
HSBC USD 50m

Co-financing activities to be further scaled-up andmainstreamed to improve capital efficiency

19

Outline

1.
2.
3.
4.
5.

OutlineAfrica Overview
Recent Investments
AfDB’s Financial Sector Development
AfDB’s Non-Sovereign Products &Projects
Q&A
20

Thank you

Mr. Kazuhiro Numasawa
Financial Sector Development Department
k.numasawa@afdb.org