AfDB Signs Loan Agreement with PTA Bank

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AfDB continues to support Regional Development Finance Institutions with comprehensive financial support to the Eastern and Southern African Trade and Development Bank (PTA Bank)

Maputo, 15 May 2008 – The Vice President in charge of Private Sector, Infrastructure and Regional Integration of the African Development Bank, Mandla S. Gantsho, and PTA Bank President, Michael Gondwe, signed on Thursday in Maputo, Mozambique, a line of credit of US$ 50 million and an Equity Capital increase of US$ 6.8 million payable as well as USD 40.8 million callable to support the Eastern and Southern African Trade and Development Bank, commonly known as the PTA Bank. In addition, a US$ 1 million grant for institutional capacity building of PTA Bank is being provided by the AfDB-managed Fund for African Private Sector Assistance (FAPA), a trust fund established by contributions from the Japanese government.

The PTA Bank is a sub-regional development finance institution whose primary activity is to provide development financial services to clients in its member states, including trade and project financing. PTA Bank provides financial and technical assistance to projects that are financially viable and economically sound, finances trade both among COMESA members and with states outside the sub-region. It also finances projects designed to help the complementarity of the economies of member states.

The line of credit will be utilized to finance sub-projects in productive sectors, including mining, manufacturing, agro-industry, floriculture, tourism and service sectors that support productive sectors. This financial support package will strengthen PTA Bank’s capacity to expand its development operations in the sub-region. Additionally, this financial support will be directed towards high-impact projects that boost employment, foreign exchange earnings, technology transfer, and the acquisition of technical skills.

Speaking on the occasion, Vice President Gantsho underscored AfDB’s commitment in supporting institutions with comprehensive assistance such as the current financial package to PTA Bank.  He hopes that AfDB’s support will go a long way in strengthening PTA Bank and enhancing the impact of its operations in the COMESA region.

The project is consistent with AfDB’s updated private sector operations strategy, which emphasizes Small and Medium Size Enterprises (SME) development using financial intermediaries as development partners. It is also in line with the Bank Group’s policy on regional and economic cooperation as well as with NEPAD objectives for regional integration and support to the private sector.

Expressing his profound appreciation for AfDB’s continued support, PTA President Gondwe stated that the new support "greatly strengthens the capacity of the Bank to play a key role in the development of its member states, as it adds to PTA Bank’s available resources, provides PTA Bank the leverage to access competitively priced funds from both local and international markets and enables the Bank to build sufficient capacity to deliver on its mandate."

The AfDB Executive Director for Japan, Tetsuya Utamura, the role of the private sector in Africa’s development and Japan’s contribution in stimulating the rapid private sector-led economic growth that is essential to create conditions for poverty alleviation.

The first LOC financed 18 sub-projects; about 67% of LOC 1 was used to finance export-oriented projects, most of which are operating successfully and having positive impact in terms of foreign exchange earning and employment generation. The Bank’s second LOC helped to finance 20 sub-projects in eight countries.  The past two lines of credits financed projects that have earned in excess of US$ 500 million in foreign exchange and have created more than 40, 000 jobs. Based on these evaluations, AfDB’s two previous lines of credit through PTA Bank have contributed to this impact.

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