The Board of Directors of the African Development Bank Group (AfDB) has approved a US$ 172-million financial package to Nedbank Group Limited of South Africa, to finance local and continental businesses.
The package comprises of a ZAR 2-billion subordinated loan and a US$ 30 million unfunded Risk Participating Agreement (RPA) facility to benefit African issuing banks in 20 Regional Member Countries (RMCs).
The sub-debt will strengthen Nedbank's Balance sheet and contribute towards the realization of its strategy to finance among other sectors, infrastructure, SMEs; digital banking and affordable housing.
Specifically, the Risk Participation Agreement will cover part of Nedbank's default risk arising from underwriting trade-related transactions originated by various African financial institutions. Given the Bank's 'AAA' rating, the Risk Participating Agreement would help Nedbank to reduce its risk capital charge for the guaranteed transactions, thereby freeing up scarce capital to underwrite more business.
The facility is therefore quite timely, as it will enable Nedbank to grow its asset book as well as increase its visibility as a credible confirming bank for African trade transactions.
The financial package is in alignment with the Bank's Ten Year Strategy and High 5 priorities in terms of jobs creation, improving the business environment and the living condition of the people through infrastructure development, support to SMEs and providing affordable housing, respectively.
