AfDB Approves Revision of its Loan Pricing Policy

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Tunis, 14 May 2010 –The African Development Bank approved a revision of its loan pricing for its sovereign and sovereign-guaranteed loans on 10 May 2010, which will come into effect from 1 January 2011.

This policy consists of a series of measures integrating several institutional objectives consistent with the cooperative nature of the institution, the maintenance of its financial strength, and the need to ensure competitive rates for borrowers.  

The measures being adopted are two-fold.  They are primarily intended to incorporate greater flexibility in the pricing mechanism, in the interests of both the Bank and its borrowers.  The Bank is introducing a periodic revision of the adequacy of the contractual margin for new loans and a possible pricing revision to take into account exceptional crisis events.  

The second series concerns measures to preserve the institution’s financial integrity while remaining competitive.  The measures include an increase in the current margin of 20 basis points for better sustainability in pricing.  Another innovation is the introduction of a graduated commitment fee on fast disbursing policy-based loans ranging from 25 to 75 basis points, applicable only to amounts not utilized within the negotiated loan draw-down table.

This new policy is particularly important for the Bank and its shareholders. For the Bank, it will ensure the compatibility of loan pricing with the objective of ensuring the soundness and long-term financial capacity of the Bank.  It also has the aim of supporting portfolio growth and to respond to additional borrower demand.

For borrowing regional member countries, it will maintain the transparency and predictability of pricing and maintain the Bank’s ability to borrow at competitive rates on the capital markets, thus ensuring the efficacy of its financial intermediary role for the benefit of African countries.

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