AfDB approves US$37.2m facility to support agribusiness projects in select countries

AFRICA – The Board of Directors of the African Development Fund (ADF), the concessional window of the African Development Bank Group, approved a credit risk participation by the Private Sector Credit Enhancement Facility (PSF) for projects in Kenya, Sudan and Senegal.

The agreement covers operations cumulatively valued at US$37.2 million and includes a corporate loan to support an East African agribusiness firm’s domestic and regional expansion, and two lines of credit targeting SME borrowers.

Launched in 2015 by the ADF, the PSF provides credit risk participations in low-income countries, and is well on its way to building a US$1.5 billion portfolio of exposures.

The approval of these operations brings the PSF’s total portfolio to US$733.25 million, comprising risk exposures in 47 operations amounting to roughly US$2.6 billion of total NSO loans. 

Under the NSO policy, the bank may provide financing or investment without a sovereign or State guarantees to private and public entities that meet specific eligibility requirements.

“We continue to advance the African Development Fund’s mission to strengthen development impact by creating opportunities for the private sector to invest in low-income countries,” said PSF Administrator Cecile Ambert.  

The bank said the approved operations were selected because of high potential to increase food production, deepen regional trade, and spur job creation, particularly for women and young entrepreneurs.

ADF provides low income Regional Member Countries (RMCs) with concessional loans and grants, guarantees as well as technical assistance for studies and capacity building in support of projects and programs that spur poverty reduction and economic development.

The provision of grants and debt relief to eligible ADF countries is intended to help bring their debt to sustainable levels and create fiscal space for priority development expenditures. 

The accumulation of new debts on non-concessional terms can undermine these objectives and introduce the risk of free-riding – a situation in which grants and debt relief provided by one or more parties cross-subsidize new borrowing from third party lenders on non-concessional terms. 

This risk is particularly high in resource rich countries in which non-concessional borrowing may be secured against future export receipts.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.