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Bank’s Lines of Credit help to deepen African financial systems, small projects blossom
The African Development Bank has since 1995 granted five loans totaling $700 million to the Development Bank of Southern Africa (DBSA), a governmental financial institution with special focus on infrastructure expansion. The transactions have helped to deepen financial markets and buoyed local businesses.
The Bank’s lines of credit enabled DBSA to finance some 20 private sector projects in eight countries, covering seven sectors (energy, industry, finance, tourism, telecoms, agriculture and infrastructure). The investments generated and sustained at least 40,000 jobs.
“For nearly 25 years, the African Development Bank has been a strong and reliable partner for DBSA. It has supported the expansion of our mandate to become a regional institution. Through this collaboration, we have been able to finance various projects that we wouldn’t have been able to support otherwise,” says Alvino Wildschutt-Prins, Investment Partnerships and International Specialist at the DBSA.
Currently, DBSA is financing six projects in Southern Africa from a fifth line of credit from the Bank, Wildschutt-Prins said.
By partnering with local financing agencies, the Bank is strengthening local financial markets and systems, and addressing gaps that commercial banks cannot resolve due to liquidity constraints or currency mismatches.
Lines of credit enable the Bank to partner with local financial intermediaries, leveraging on their extensive knowledge of the domestic context and effective delivery channels in the country to reach clients, who may be below its minimum threshold in terms of transaction size or risk categorization.
The Bank also uses these loans to support promising industries such as tourism, thereby promoting fresh areas in a bid to help diversify African economies.
In 2003, DBSA loaned $5 million to the David Livingstone Safari Lodge and Spa for the construction of 72 bed guestrooms, administration buildings, cruiser and other recreation facilities. The hotel is located at the internationally acclaimed Victoria Falls and a center of attraction for international tourists in Zambia.
This has led to the creation of 81 full-time jobs, including 52 for women, in addition to some 50 indirect jobs for suppliers, commercial drivers, retailers and other service providers.
For the African Development Bank, lines of credit are a reliable financial mechanism that permits it to pursue its mandate of strengthening local financial markets and systems and to support regional integration.