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FMO has agreed to provide a long-term loan of USD 10 million to the African Local Currency Bond Fund (ALCB Fund). The ALCB Fund acts as an innovative anchor investor in local currency bond issuances across the African continent. To date, it has mostly invested in (micro) finance institutions. The bonds’ use of proceeds are predominantly in financial inclusion and, to a lesser extent, SME banks, housing, renewable energy and agriculture.
Huib-Jan de Ruijter, Director Financial Institutions of FMO commented that 'FMO is proud to partner with the ALCB Fund to build local capital markets. To foster financial inclusion it is essential that clients get access to the right products and services that typically include local currency finance. Building local capital markets will increase the accessibility and affordability of local currency finance.'
Vitalis Ritter, Director of the ALCB Fund, highlighted that the Fund was conceived with the mandate to play an innovative and catalytic role in strengthening African local currency capital markets. Since its inception in 2012, the ALCB Fund has demonstrated its key role in developing African bond markets, which is now further underscored by FMO’s support. Vitalis noted that “We (the ALCB Fund) now have an exceptionally strong group of dedicated shareholders and investors, including FMO, FSDA and IFC, who are joining the German Government, to continue and expand our work across the continent. The Board is excited about this demonstration of trust in and the prospects of the ALCB Fund”.
The Fund works to support local currency bond issuers by stimulating longer-term local currency funding, enabling capital market development and increasing investment opportunities in rated bond instruments for local institutional investors. By successfully drawing in local investors, the Fund provides bond issuers with much needed access to longer-term local currency funding. As such, bond issuers minimize the exchange rate risk associated with USD funding usually secured from international investors. Capital market development is also key, because the broader ecosystem surrounding local capital market service providers benefits from increased deal flow and transparency of issuers.
The ALCB Fund was established in 2012 and is an initiative of KFW, the German development bank, on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) The Fund is managed by LHGP Asset Management.