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Private Sector Private Sector Development:Development:Cooperation Cooperation
OpportunitiesOpportunities
Introduction OPSM’s commitment to holistic, vertically
integrated development to complement growth in its lending and investment activities
OPSM has met its mandates for growth, and is increasingly seeking to enhance its products with better development support
In addition to vertical development integration, OPSM is pursuing syndicated and A/B loans modalities to recycle capital risk and increase lending in Africa
Co-financing Investment Operations
AfDB’s Private Sector now aims to attract capital for co-investment into projects in Africa
OPSM’s Co-Financing Platform includes: B-Loans with Commercial Banks
African Financing Partnership (AFP)
Parallel Financing
Bilateral Agreements
Asset Sales
Massive potential could be yielded by a first-loss guarantee scheme for OPSM’s portfolio
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A/B Loan Structure Commercial Banks can co-finance projects under AfDB’s B-
Loan
AfDB acts as Lender-of-Record Keeps part of the loan (the A-loan) at least 25% of total loan
Sells participations to B-loan participants
B-loan participants benefit from AfDB’s Preferred Creditor Status (“PCS”) as a Multilateral Development Bank which offers: currency conversion / remittance of interest
Repatriation of principal
Exemption from withholding tax
Deterrent effect on : nationalisation, interference
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A/B Lending Eligibility Viable and commercially operated financial institutions
Institutions NOT eligible: Banks incorporated or with head office in the country where
the borrower is incorporated or the project is located
Export credit agencies (ECAs)
Governmental, quasi-governmental, or multilateral agencies
Project sponsors and off-takers
Eligible participants require an investment grade rating In exceptional cases the AfDB may accept lower-rated or unrated
participants
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African Financing Partnership
The AFP is a collaborative co-financing platform for Private Sector project financing initially among 8 DFIs for Africa.
Each DFI will make its own independent decision on participation while maximizing synergies in co-financing.
Target Operations: complex, large projects in infrastructure, industries with efficiency gains via DFI harmonization.
An MOU has been signed endorsing ‘enhanced collaboration’ by the AFP Partners.
AFP Operational Guidelines are being formalized to create framework for DFI collaboration on project financing.
AFP website is under development
Parallel Co-Financing AfDB Private Sector invites DFIs and other financial
institutions to co-finance projects in Africa
AfDB is pleased to lead or to participate in transactions originated by others
Investment and discussions with other DFI’s have included: China Development Bank
Japan International Cooperation Agency (JICA)
Japan Bank for International Cooperation (JBIC)
The OPEC Fund for International Development (OFID)
Oesterreichische Entwicklungsbank AG (OeEB) Austria
Islamic Development Bank Group
And Others
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Bilateral Agreements In order to enhance efficiency of operations, AfDB
can consider entering into Bilateral Agreements with DFI’s for co-financing Private Sector projects.
Eligible to partners willing to co-finance similar projects in Africa.
Open to both AFP and non AFP partners who wish to form a closer relationship with AfDB.
Based on applying “commercial syndication practices” to DFIs
Benefits to the Borrower by aligning DFI practices with commercial practices.
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Sale of Assets In future AfDB likely to be more involved in
partial sales of existing assets due to; Need to fulfill the mandate of catalysing financing into
Africa
Achievement of role in initial project financing - project can be commercially financed following the initial role of the Bank
Financial capacity constraints overall or in specific countries
Sales may be achieved by; Participation by other commercial parties
DFI interest
Swaps in country/ sector or other exposure between DFI’s and commercial parties
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First Loss Guarantee Leveraging the AfDB’s private sector
operations portfolio in low income countries to catalyze more private sector development
Two guarantee schemes: Portfolio guarantee
Performance guarantee
PSO Portfolio Risk Profile
Portfolio guarantee covers first 10% of losses on ADB’s portfolio of private sector operations (e.g. UA 200 million on a projected PSO portfolio of UA 2 billion)
By taking “first loss” the guarantee dramatically reduces the effective risk of the portfolio and thus enables the ADB to scale up its private sector operations in LICs by 3x-4x.
The “first-loss” concept successfully used by TCX, EAIF
Size of Loss
“Expected Loss”
Fir
st L
oss
Fir
st L
oss
G
uara
nte
e
Guara
nte
e
Residual AfDB Risk
Residual AfDB Risk
Performance Guarantee
Guarantee covers payments from public off-taker to a private sector infrastructure project
The performance guarantee would dramatically reduce the effective risk on the project Lenders thus enabled to finance what appear to be
“unbankable” PSOs
IDA has successfully used this scheme
ProjectCompany
PublicOff-taker
Lenders $$
ADFGuarantee
Enhanced Private Sector Assistance Initiative
Launched in 2005
Partnership with the Government of Japan
Three components:
Fund for African Private Sector Assistance (FAPA)
Accelerated Co-financing Facility for Africa (ACFA)
Loan for Non-sovereign Operations (NSL)
Achievements to-date
Approx $42 million contributed with $26.55 million committed and $8.7 million earmarked for pipeline 31 projects throughout Africa are receiving
support
62% of approved FAPA grants are linked to other AfDB instruments/projects
42% of FAPA commitments to LICs, 45% to multinational projects and 13% to MICs
Donor & AfDB Support
Japan has contributed $32 million
AfDB Board of Governors has contributed UA 7 million
AfDB Board of Directors has shown continued and growing support for FAPA’s achievements
Indicative commitment from Austria conditional upon Multi-donor conversion
Objectives & Targets for 2010
20 projects committed to in 2010 for $17 million
Multi-donor conversion complete
Additional donors committed to financial support
FAPA extended beyond original five year term (2006-2010)
Projects with first disbursements before 31 October 2010 will have at least one supervision mission
Obstacles & Needs $8.7 million of FAPA’s $42 million remains
uncommitted and un-earmarked for pipeline If 2010 objective of $17 million in projects is
achieved, all available funding will be committed
Further commitments required to meaningfully extend FAPA beyond 2010
Growth in volume of projects may require further human resources, particularly for supervision Many FAPA projects are reaching mid-term
implementation and require proper supervision
Introduction & Background
SMEs are key players for poverty reduction and meeting the MDGs in Africa They contribute about 60% of GDP and 55% of
employment
To fulfill their developmental role SMEs need increased access to finance, particularly bank credit
Strong case for scaling up aid for SME development while increasing its effectiveness
2009: Africa Commission, appointed by Danish Prime Minister and with AfDB President Kaberuka as a member, recommended establishment of AGF to address this situation Founding partners: AfDB, Danish Government, and
IFC
Achievements to-date
Joint preparation process from September 2009 with AfDB as lead partner, involving Oversight Committee, Focal Point, Advisory Panel
Instruments designed: Guarantees
Partial loan guarantees: guarantees provided to lenders to cover part of the net losses incurred on SME loans. Delivered through a portfolio approach
Portable guarantees: letters of guarantee commitment issued to lenders to raise long-term finance for SMEs. To translate into loan guarantees
Capacity development support For financial institutions: TA to enhance lenders’ ability to do
business with SMEs
For SMEs: TA to improve borrowers’ business management skills
Major Thrusts Expected capital at start-up: USD 40 million
Envisaged capital after 5 years: USD 300 – 500 million
New partners needed to reach this: Donors for junior/first-loss capital
Development finance institutions for mezzanine capital
Private investors and foundations for senior capital
Initial countries of operation: Cameroun, Ghana, Kenya, Mali, Mozambique, Senegal, Tanzania, Uganda and Zambia.
Gradual roll-out to all African countries
Objectives & Targets for 2010
Registration of company expected in 2nd half 2010
Set-up of AGF office with CEO and key staff: 2nd half 2010
First guarantees signed: Before end 2010
Capital increases and new partners : From 2011 onwards
Microfinance Capacity Building Trust Fund
Background July 2009: establishment
as a bilateral trust fund in Partnership with the Government of Spain
Oct – Dec 2009: Implementation guidelines, three year business plan and first annual work plan were drafted. UNCDF expressed interest in joining the Fund
Partners designed Liberia intervention program
Action Plan
Finalization and Board approval of Multi-donor Framework
Map interventions for activities after Liberia program is underway
First activities in Liberia undertaken and disbursed
Launch of an Inclusive Financial System -
Liberia Financial inclusion identified as key objective
by AfDB & Government of Liberia
LIFS initially designed by UNDP & UNCDF
LIFS II designed to focus on micro and meso level intervention Will partner with MCBTF
Resource needs valued at USD 30.25 million
Migration & Development Initiative
Background Established as a Multi-donor
Partnership with the Government of France/Ministry of Migration and Integration and IFAD.
Initial Focus on North and West Africa
Areas of Intervention
Knowledge management of migrant fund flows
Improve regulations related to fund transfers
Develop new and innovative financial products
Promote Investments and Local Development
Objectives Map fund transfers
throughout Africa.
Disseminate information to citizens of African countries abroad
Assist reform of regulatory frameworks
Fund and mobilize innovative financial products and intermediaries
Promote productive investment in domestic SMEs
Sustainable Energy Fund for Africa
Background Sustainable Energy identified in
2009 by Africa Commission as key contributor to private sector-led growth in Africa
Initial partnership agreed between Denmark and AfDB
Established to stimulate emerging sustainable energy market in Africa, particularly for SMEs
Production, distribution and consumption of SE
Focus on rural and peri-urban areas
Seeks to leverage additional financing
Action Plan SEFA operational by end
of Q3 2010 Danida Board approval
in Q2 2010 Danida appraisal
currently underway
AfDB Board approval in Q3 2010
SEFA administrative team established by end of Q2 2010
Stakeholder workshop in Q2 2010