Finance

AfDB approves $10 million investment in Dhamana Guarantee Company Ltd, East Africa

Tuesday, 21 November 2023 13:44
AfDB approves $10 million investment in Dhamana Guarantee Company Ltd, East Africa

(AfDB) - The Board of Directors of the African Development Bank Group has approved a $10 million equity investment in Dhamana Guarantee Company Limited to support the use of capital markets as an alternative source of long-term funding for infrastructure and the real sector in East Africa.

Dhamana will be domiciled in Kenya as a limited liability company with a regional mandate to provide credit guarantees on debt capital market instruments. The Bank Group’s financing will enable Dhamana to issue guarantees for debt instruments. These local currency bonds are intended to boost the credit rating of the instruments to crowd in investment from pension funds, insurance companies and sovereign wealth funds to finance infrastructure and the real sector in East Africa.

The Bank, together with InfraCo Africa (part of the Private Infrastructure Development Group), Financial Sector Deepening Africa, and local institutional investors and other partners, will be supporting the operationalization of Dhamana.

Dhamana will support access to financing for key sectors including transport, water, renewable energy, and waste management, among others. Dhamana is committed to catalyze financing to assist the scale-up of green and sustainable financing into East Africa. Its credit guarantee activities should provide investors with the necessary comfort to support the allocation and intermediation of pools of private institutional investors’ funding into infrastructure.”

Nnenna Nwabufo (photo), African Development Bank Director General for the East Africa region, said, “The African Development Bank is pleased to continue to support the operationalization of innovative solutions such as those provided by Dhamana to unlock and channel long-term local currency funding towards the real sector.

PIDG’s CEO, Philippe Valahu, said, “African Development Bank joining PIDG marks a significant milestone for the Dhamana Guarantee Company. This additional equity will allow Dhamana to further mobilise significant untapped pools of domestic institutional capital into East Africa’s real economy, such as new green infrastructure, and providers of credit to individuals and businesses. We are committed to catalysing the development of domestic capital markets in Africa, as we seek to unlock investment for bankable, climate-resilient projects to be delivered with the scale and urgency required to meet the challenges of climate change and welcome the support of African Development Bank in Africa to help achieve this goal.

Ahmed Attout, African Development Bank Acting Director for Financial Sector Development, said: “The Bank’s support for Dhamana shows the catalytic role and potential of guarantee companies in leveraging opportunities for real sector and infrastructure financing in local currency and local corporate debt capital markets deepening in the East Africa region. The investment in Dhamana follows the Bank’s priority to mobilize institutional financing for infrastructure investment in East Africa.”

The Bank’s partnership with Dhamana advances several strategic objectives including to help stimulate local currency debt market financing across diverse infrastructure sectors and enhancing economic diversification and competitiveness in the region. The intervention also aligns with the Bank’s priorities to promote regional integration including through improved infrastructure development, promotion of inclusive and sustainable industrialization, and fostering innovation.

The investment aligns with African Development Bank strategic efforts, in collaboration with development partners, including PIDG, to operationalize credit enhancement companies in selected Regional Member Countries.

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