As a multilateral development finance institution, the African Development Bank (AfDB) Group seeks to further the social and economic well-being of its regional member countries. To attain this objective, the Bank uses the leverage afforded by its AAA rating to on-lend to its borrower countries, at favorable terms, resources raised in international capital markets.
Up until 1997, only one loan product, the multi-currency variable rate loan (VLR), was offered by the Bank. The shift to a more dynamic multi-product institution that took place that year was predicated on the desire to increase flexibility and choice.
The Bank’s lending environment was made more responsive to the borrower countries’ varied and evolving needs. With the introduction of single currency loans, borrowers were given the option to choose from a number of currencies readily available to the Bank, including the South African Rand, along with three interest rate bases. Since 2000, the AfDB offers its borrowers flexibility to customize their debt repayment profile with access to annuities, step-up or step-down amortization of principal or bullet repayment. These features enable sophisticated borrowers to profile their loans to fit their specific needs.
Flexibility and freedom of choice, again, are the main thrust of the introduction in 2002 of a range of Risk Management Products including interest rate and currency swaps, caps, collars, commodity hedges and indexed loans enabling borrowers to manage risks occurring during the life of a given loan. These hedging instruments allow borrowers to better manage the financial risks associated with their ADB loans, to access market-based hedging tools using the Bank as an intermediary, and to actively manage their AfDB debt portfolio.
With the introduction of guarantees in 2004, the Bank has opened up a new window of opportunity for borrowers who want to access resources from third-party lenders, including capital markets. Guarantees are also an effective tool for encouraging local currency borrowing.
On 9 December 2009, Board of Directors of the Bank approved several amendments to the menu of the Bank’s financial products. These amendments include the withdrawal of the Variable Rate Loan (VLR) Product for all borrowers, the maintenance of the temporary suspension of the Fixed Spread Loan (FSL) product and the introduction of the Enhanced Variable Spread Loan (EVSL) Product for sovereign guaranteed borrowers.
- 09/12/2015 - AfDB approves US $53 million for water in Zimbabwe and financial reform in Chad
- 12/08/2015 - Fitch affirms African Development Bank at ‘AAA’; Outlook stable
- 29/05/2015 - Interview with Stefan Nalletamby, Director, Financial Sector Development, AfDB
- 06/02/2015 - AfDB issues 1.375% USD 1 billion global benchmark due 12 February 2020
- 03/12/2014 - AfDB issues a 6.625% ZAR 500 Million Eurobond due 9 December 2017