Supporting the development of African capital markets

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The African Local Currency Bond Fund ("ALCB Fund") is a pan-African investor in local-currency corporate bonds.

The ALCB Fund works with African issuers, investors and intermediaries to bring new bond transactions to market, aiming to deepen local capital market ecosystems. The Fund does so by being an anchor investor and providing technical assistance. It is also an advocate, aiming to demonstrate the benefits, for end-beneficiaries, investors and issuers, of local capital markets as a source of sustainable long-term financing.

The Fund was established with a dual mandate to support the development of domestic African capital markets, while also channeling private-sector investment to SDG-aligned transactions where the ultimate beneficiaries are low-income households and MSMEs.

The Fund invests in a diverse range of sectors, including financial services, infrastructure, agriculture, housing, education, healthcare and renewable energy.

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impact (2023)

$323M

Investment amount to date

$3,002m

Private sector co-investment mobilised

9.5x

Co-investment multiplier

95

Investments to date

16

Countries with investments

45%

Proportion of female borrowers

33%

Proportion of rural borrowers

18,312

Carbon displaced (tCO2e)

APPROACH

01

Identify institutions capable of issuing local currency bonds in key development sectors.

02

Promote the benefits of local currency bonds to investors, regulators, and issuers.

03

Provide technical assistance to lower transaction costs and boost capital market development.

04

Serve as an anchor investor to attract local investment to developmental sectors.

05

Conduct rigorous due diligence and introduce improved credit standards.

06

Ensure harmonised standards and legal documentation for broad bond marketability.

07

Support transparency through listed bonds and other public disclosure methods.

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Our Mandate

Mission

KfW and the German government established the ALCB Fund in 2012 to promote corporate local currency bond markets as a viable source of funding in Africa. The Fund focuses on three core areas of impact:

  • Act as an anchor investor and provides technical assistance to financial service providers.
  • Improve the sustainability and diversity of funding sources for issuers, reducing risks for individual institutions and the financial sector.
  • Ensure greater economic opportunity for target beneficiaries, specifically low income households and MSMEs by facilitating sustainable borrowing, long-term investment and financial-sector sustainability.

The mission of the ALCB Fund follows the G20 Action Plan to Support the Development of Local Currency Bond Markets (LCBMs), adopted by the Group under the French Presidency in 2011.

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Why LOCAL MARKETS matter

Local bond markets are a crucial part of any domestic financial sector ecosystem. Bonds enable corporations and financial institutions to raise long-term capital from local institutional investors through standardised, transparent instruments under common terms and documentation. Raising funding in local currency also helps companies minimise their FX risk, matching the currency of borrowings to revenue.

Local institutional investors are natural funding partners for any established corporate/financial institution, as they best understand their local market context and have an inherent interest in supporting their nations economic development. Investing in local currency funding also creates a virtuous cycle whereby economic growth leads to increased savings accumulation, which in turn drives greater domestic investment and further growth.

The bond market is comprised of multiple stakeholders. On one side there are issuers requiring financing to operate and grow. On the other are investors, who have local currency liquidity available to support such investments. This includes local pension funds, insurance companies, banks and retail investors. Between the two are several market intermediaries including arrangers, accounting and legal advisors, rating agencies, and regulators. These intermediaries are crucial in facilitating the smooth operation of the capital market ecosystem, ensuring the efficient allocation of investors capital to the businesses that need it.  

The ALCB Fund takes a supply-driven approach, working to bring new bond issuers to market and increasing deal flow. Through more regular issuances, market intermediaries capacity grow, inherently leading to larger and more complex transactions over time. In addition, the Fund’s anchor role and enhanced due diligence standards provide comfort for local institutional investors to participate in innovative or first-time transactions. And as investors become more accustomed to investing in bonds, the supply of bonds in the domestic market will also rise.
Over time, the ALCB Fund also aims to further deepen local markets by encouraging longer tenors, more complex transaction structures (e.g. project bonds or securitisation), and advocating for improved market standards such as labelling and credit ratings. The Fund also aims to work with other development partners (including FSD Africa) to support the strengthening of the regulatory/institutional framework of local markets.

Theory of Change

The ALCB Fund has developed a Theory of Change framework that guides its activities towards developmental objectives. The Fund has identified four key SDGs which drive the portfolio’s impact goals.
These are:


  • SDG 1: No Poverty
  • SDG 8: Decent Work and Economic Growth

  • SDG 13: Climate Action

  • SDG 17: Partnerships for the Goals


As the Fund targets investments in several sectors, its investment activities also contribute to a diverse number of additional SDGs.

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