To strengthen the capital base of local financial institutions and stimulate Africa's corporate bond market, the African Development Bank has approved a US $10-million 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 $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.

Technical contact: Kazuhiro Numasawa, Principal Investment Officer