(Ecofin Agency) - Fitch Ratings last week reaffirmed the 'B' long-term credit rating of the West African Development Bank (BIDC), despite potential challenges from the withdrawal of Mali, Niger, and Burkina Faso. 

The American rating agency noted that about half of BIDC's loans are granted to sovereigns, none of which were in default. This has been crucial in improving the average loan portfolio rating. "The average loan portfolio rating was 'B-' at the end of 2023, unchanged from 2022. About half of the loans are granted to sovereigns, all performing at the end of 2023. BIDC's preferred creditor status on its sovereign exposures led to an improvement of one notch in the average loan portfolio rating to 'B'," stated Fitch in its report.

However, while BIDC is expanding its loan portfolio, which saw a 17% increase in 2023, future growth could slow due to geopolitical and economic uncertainties in the region, according to Fitch. Non-performing loans dropped to 5.7% of total loans at the end of 2023, down from 7.5% in 2022 and 9.8% in 2021, primarily due to stricter underwriting criteria and new prudential indicators.

Fitch warned that the withdrawal of Burkina Faso, Mali, and Niger, which together represent 23% of the bank's total loans, could seriously impact BIDC's financial stability. The bank's capital ratios have fallen slightly in 2023, with the equity-to-assets ratio dropping to 29% at the end of 2023 from 31% in 2022. The agency expects these capital ratios to stabilize, but the departure of the three Sahelian countries could increase non-performing loans despite BIDC retaining $33 million of capital contributed by these countries to cover part of the gross exposures to the three sovereigns, estimated at $124 million.

The bank's liquidity management remains an area of vulnerability, with only 6% of its liquid assets being of investment grade quality, and the rest held in local banks rated 'B' or lower. Also, liquid assets covered only 92% of short-term debt at the end of 2023.

Resource mobilization has been strong, with significant contributions from regional shareholders, including $19.8 million from Ghana in 2023 and $29.6 million from Ghana and Côte d'Ivoire in the first quarter of 2024. These contributions have bolstered the bank's capital ratios.

The bank has also secured new bilateral financing sources, including a five-year $70 million loan facility from Mashreq Bank (United Arab Emirates) in March 2022. In April 2022, it obtained guaranteed loans from SERV and BPI France via Commerzbank for agro-industrial and infrastructure projects in Côte d'Ivoire, Benin, and Burkina Faso. Additionally, a €50 million credit line from Bank One Limited was secured, with an option to increase up to €100 million.

In November 2023, Saudi Exim Bank provided $25 million in financing, and in October of the same year, Afreximbank provided a package of €50 million during the IMF and World Bank Annual Meetings in Marrakech. In March 2024, a deal was signed with the African Development Bank (AfDB) for a dual-currency credit line of $50 million and €50 million.

These diverse partnerships underline the Bank's efforts to attract non-regional investors, with 30% of the capital now open to regional investors. The bank is looking to expand its investor base, especially outside its regional zone.