Fund set to inject Sh1.72bn in Africa’s bond markets

Mark Napier, FSD Africa director. PHOTO | SALATON NJAU | NMG 

By JAMES NGUNJIRI

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Summary

• The money will be invested through the African Local Currency Bond Fund (ALCBF) established by KfW Development Bank on behalf of the German Ministry for Economic Cooperation and Development (BMZ) in 2012.
• The fresh injection of capital will take ALCBF’s total equity to Sh5.98 billion.
• FSD Africa investment is expected to increase the number and size of bond issuances in sub-Saharan Africa and reduce the cost of capital for borrowers.

Financial Sector Deepening Africa (FSD Africa) will support the continent’s bond markets with a 15.3 million euros (Sh1.56 billion) investment fund aimed at improving private sector access to long-term and local currency financing.

The fund will be invested through the African Local Currency Bond Fund (ALCBF) established by KfW Development Bank on behalf of the German Ministry for Economic Cooperation and Development (BMZ) in 2012.

ALCBF is managed by Lion’s Head Global Partners (LHGP) Asset Management LLP (LFGP AM), an investment and advisory firm regulated by the UK Financial Conduct Authority with offices in London and Nairobi.

The fresh injection of capital will take ALCBF’s total equity to 53 million euros (Sh5.98 billion).

“The lack of long term, local currency funding is one of the most serious problems in Africa’s financial markets. It means that good projects don’t get funded and much needed jobs don’t get created,” said FSD Africa director Mark Napier in a statement.

ALCBF has invested a total of 33 million euros (Sh3.72 billion) in the last four years and its current outstanding portfolio is 24 million euros (Sh2.71 billion).

Its investments are in the financial sector, including micro-lenders, micro, small and medium enterprises (MSME) lenders, leasing companies and lenders in the health, education and housing finance sectors.

FSD Africa investment is expected to increase the number and size of bond issuances in sub-Saharan Africa and reduce the cost of capital for borrowers.

The fund never buys more than 50 per cent of a bond.

Last year, for every one euro (Sh113) invested by FSD Africa in local currency bonds, 6.30 euros (Sh711.90) was invested by third parties.

FSD Africa has also agreed to contribute 500,000 euros (Sh56.5 million) towards ALCBF’s technical assistance facility.

FSD Africa recently committed Sh61.8 million over a period of three years to fund the Kenya green bond programme aimed at aiding Kenya Bankers Association (KBA) tap the growing investor demand for green investments.