AfDB invests more than €23m to boost the African bond market

Dec 14, 2016

The AfDB stated the fund will address the perception and challenges that create barriers for investors to commit to local currency fixed income in Africa.

The African Development Bank (AfDB) has approved a seed equity capital investment of Sh2.5 billion (€23.5 million) into the African Domestic Bond Fund (ADBF).

The group created the fund in 2008, as part of the African Financial Markets Initiative (AFMI), to reduce Africa’s dependency on foreign currency-denominated debt and strengthen domestic bond market infrastructure.

The AfDB said the fund will address the perception and challenges that create barriers for investors to commit to local currency fixed income in Africa.

"The ADBF aims to stimulate the development of African domestic bond markets through the provision of an innovative and efficient product in the form of an enhanced Index Bond Fund to broaden investor participation," said Charles Boamah, the Bank's Finance Vice-President and Chairman of AFMI.

The fund is structured as an enhanced Exchange Traded Fund (ETF) listed in Mauritius, but will also be listed in other stock exchanges in order to attract
other investors.

The AfDB is confident that the ADBF will strengthen bond issuance in Africa. It said the markets show that African credit risk is not the stumbling block for international investors, but that capital has been staying on the side-lines because of technical barriers that can mostly be overcome.
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