AfDB Approves USD 50 Million Investment in Africa Capitalization Fund
Tunis, 28 April 2010 - The Board of Directors of the African Development Bank (AfDB) Group, through its private sector window, approved on Wednesday, 28 April 2010 in Tunis an equity investment equivalent to USD 50 million in the Africa Capitalization Fund (ACF).
The ACF is an 8-year, pan-African investment fund, with a targeted investment level of USD 200 million. ACF is focused on investing capital and subordinated debt in commercially viable, systemically important banks to strengthen their lending ability.
The Fund is expected to deliver strong development impact by:
- Stabilizing portfolio banks, maintaining and/or creating jobs in their respective countries;
- (Strengthening private sector development through the provision to portfolio banks of advisory services aimed at improving their economic and financial performance;
- Catalyzing private sector investments into emerging financial markets;
- Focusing on smaller countries due to diversification requirements and the relative sizes of banking systems in emerging markets.
The ACF may make investments directly or indirectly, through holding companies, subsidiaries, or otherwise. It offers an opportunity for governments to privatize the relevant banks in their country, and for family-owned banks to diversify their ownership and expand their operations regionally, which will result in better capitalized, more resilient banks and stronger financial markets on the continent.
The Fund adopts a pan-African perspective and will strengthen regional banks, in line with the AfDB’s Regional Integration Strategy. It aligns well with the Bank’s Private Sector Operation Strategy which aims to improve the enabling environment for private sector development, by providing assistance in “soft infrastructure” (e.g. financial sector development, trade liberalization).
The ACF is an efficient tool to help strengthen systemic banks in RMCs, allowing them to increase lending to the private sector, thereby improving livelihoods and Africa’s economic growth. The Bank’s participation will have a demonstration effect, helping to catalyze funding from other investors. It also leverages key partnerships with other DFIs, such as the IFC, creating synergies and maximizing the strengths and experience of different players.