Project detail - ALCB FUND

ALCB FUND

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Who is our client

The African Local Currency Bond Fund ("ALCB Fund" or "the Fund") acts as an innovative anchor investor in local currency bond issuances across the African continent. The bonds’ use of proceeds are predominantly in financial inclusion and, to a lesser extent, SME banks, housing, renewable energy and agriculture. To date, the Fund has mostly invested in bond issuances by (micro)finance institutions. Through its work, the Fund helps develop local capital markets. 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).

Funding objective

FMO partners with the ALCB Fund to stimulate longer term local currency financing for microfinance institutions and other non-sovereigns in Africa, to help build capital markets on the African continent and to stimulate investment in the bond issuances by local institutional investors. Local currency bond issuers minimize the exchange rate risk associated with USD funding usually secured from international investors. Building local capital markets will increase the accessibility and affordability of local currency finance, amongst others by helping increase the amount of investment opportunities in rated bond instruments for local institutional investors. The ecosystem of local capital market service providers benefits from increased deal flow that results from the Fund's activities.

Why we fund this project

The innovative approach this Fund brings to increasing access to local currency funding for financial inclusion and broader development targets, working with partners such as KFW, fits with FMO's Strategy. At the same time, FMO contributes to SDG 1 "No Poverty" and SDG8 "Decent Work and Economic Growth" through this investment.

Region
Africa
Country
Africa
Sector
Financial Institutions
Signing date
10/3/2017
Total FMO financing
USD 10.00 MLN
Fund
FMO
Risk categorization on environmental and social impacts, A = high risk, B+ = medium high risk, B = medium risk, C = low risk Environmental & Social Category
(A, B+, B or C)
B