Project detail - ALCB Fund S.A. SICAV-RAIF

Who is our prospective customer?

The ALCB Fund acts as an innovative anchor investor in local currency bond issuances across the African continent with the majority of investments in the Sub-Saharan part of the continent. The bonds’ use of proceeds primarily include financial inclusion, MSME financing, affordable housing, renewable energy and agriculture. The 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). Through its work, the Fund helps develop local capital markets.

What is our funding objective?

FMO is providing a USD20mln senior loan to the ALCB Fund (7y tenor, 4y grace) to stimulate longer-term local currency financing for non-sovereigns in Africa especially in Least Developed Countries, to help build capital markets on the African continent and to stimulate investment in the bond issuances by local institutional investors. The Fund’s initiatives contribute to the growth of capital markets across the African continent and encouraging investment in local bond issuances by local institutional investors. By promoting local currency bond issuers, the Fund mitigates the exchange rate risk typically associated with USD funding from international investors. ALCB also plays a hand-holding role to potential first-time issuers by linking them to bond markets and local players and providing them with advice and technical assistance.

Why do we want to fund this investment?

FMO’s funding allows the Fund to grow its assets under management, expand its portfolio, and further scale its impact. The long tenor of the investment allows for better asset-liability management. Given the risk profile of the markets the Fund invests in, at present, financing with such tenor is only provided by DFIs. The innovative approach of the Fund enhances access to local currency funding and thereby increases the resilience of African companies and fosters growth of capital markets across the continent. The investment will have a 100% RI label as 50% of the loan proceeds will be channeled to African Least Developed Countries.

What is the Environmental and Social categorization rationale?

ALCB has been designated E&S category B. This categorization considers the Fund’s specific mandate, which involves pursuing E&S risk Category B investments across diverse sectors, including inclusive finance, affordable housing, infrastructure, health, education, renewable energy, and agribusiness. The ultimate beneficiaries of the Fund’s investments are low-income households and MSMEs. ALCB has a robust ESMS, which aligns with international standards such as the IFC Performance Standards and Equator Principles. Additionally, the Fund is committed to client protection principles and complies with national laws. These measures effectively mitigate the Fund's limited leverage associated with its bond investments.

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Date	Total FMO financing
10/3/2017	USD 10.00 MLN