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African Development Fund Board approves US$ 141 million credit risk participations under Private Sector Credit Enhancement Facility
The Board of Directors of the African Development Fund (ADF), approved on Wednesday, 11 October 2017 in Abidjan credit risk participations in eight loans cumulatively valued at US$ 141 by the Private Sector Credit Enhancement Facility (PSF).
Launched in 2015, the PSF is an off-balance sheet and arms-length vehicle, funded by the ADF, the concessional arm of the African Development Bank Group (AfDB) which participates in the credit risk of the private sector operations of the AfDB. Its mandate is to release capital held against loans in low income countries, to increase private sector financing in those countries. Over the next three years, the Facility is building a portfolio of US$1.5 billion of private sector credit exposures in emerging and frontier African markets.
The eight operations approved include lines of credit to SME lenders in Sierra Leone, Burkina Faso and Nigeria. The proceeds of the loans will support investment projects in the manufacturing, agriculture, construction, services and transport sectors. They also include trade finance lines with a Mauritanian SME lender and a Nigerian universal bank. Finally, two operations with regional development finance institutions complete the portfolio of approved risk participations, which brings the total portfolio of the facility to 1/3 of its US$ 1.5 billion target size and increase the PSF’s footprint to 25 countries..
“In the last 12 months, operations entering the PSF portfolio have been exposures in large infrastructure as well as agro-industry investment projects and programs. The eight operations will rebalance the portfolio across sectors, regions, maturities and risk profile – and deliver on the mandate to provide headroom relief for new financing of investment projects in low income countries. This positions the Facility to share risks with the AfDB in the financing of new investment projects in the real economy and infrastructure sectors – while remaining compliant with its risk framework”, says PSF Administrator, Cecile Ambert.
The eight operations were also chosen in light of their expected superior development results and additionality, in terms of job creation and financial inclusion, notably for women and local businesses. The operations with development finance institutions are targeting new power generation and transmission capacity, improved logistics, market access, and support to local value addition. All trade finance lines are targeting the lengthening of tenors for African exporters and importers, in a context of global trade finance contraction away from riskier markets.