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Tunis – 12 June 2009 - The Board of Directors of the African Development Bank (AfDB) Group has approved a US$ 5 million subordinated loan for the Liberian Bank for Development and Investment (LBDI).
The subordinated facility will provide LBDI with the required funding to meet the increasing demand for long-term financing from certain key sectors of the Liberian economy including SMEs, services, construction, agri-business and light manufacturing. The facility has been designed to provide LBDI with an instrument that has an extended tenor and can qualify as Tier II capital in meeting regulatory requirements.
It will cater to the needs of one part of LBDI’s total fundraising program, which consists of two parts. On the one hand, the institution is planning a share offering of 500,000 new common stocks of US$ 20 each. If fully subscribed, the share offer will increase the company’s share capital to about US$ 16 million. In addition to the proposed capital increase, LBDI plans, over the medium-term, to procure debt finance for a total amount of US$ 10 million, the first phase of which is the AfDB sub-debt facility.
This facility will play a crucial role in restoring LBDI’s capacity to provide medium- and long-term funds for development-oriented projects and respond to the needs of the critical SME sector, which accounts for over 80% of economic activity and employs over 90% of the workforce.
This Investment is in keeping with the Bank’s Private Sector Operations strategy regarding: (I) strengthening and deepening of financial systems, and (ii) Bank support to private enterprises (particularly, SMEs,) through financial intermediaries. In line with the Bank’s private sector development strategy, the sub-debt represents an innovative instrument for deepening the Liberian financial system by partnering with a capable local institution, which has the reach and capacity to cover markets that are currently underserved and deliver strong development impact.
This facility to LBDI is an example of a strategic partnership in the private sector of a post conflict fragile state to support economic growth, consolidate the prevailing stability and promote social progress. Once implemented, the facility will enable LBDI assist in the revival of key sectors and expand its activity to cover more SMEs, which will in turn create job opportunities, grow incomes and improve living standards. It is estimated that about 6,000 jobs will be created as a result of this intervention.