The African Development Bank has put together a report exploring how structured finance techniques could be used to mobilise African domestic capital to support various infrastructural projects to spur economic growth.
The report, entitled "Structured Finance -
Conditions for Infrastructure Project Bonds in African Markets", was
launched by AfDB vice-president Finance Charles Boamah last Friday in
Washington on the sidelines of the International Monetary Fund-World Bank
spring meetings.
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| Vice President of Finance (CFO) for the African Development Bank (ADB), |
The report highlights the opportunity for project
bonds, while outlining the conditions for efficient capital markets. In that
regard, the report explains the crucial role of constructive government policies
and draws lessons from other markets.
The release of the report comes at a time when
African countries have been growing at rates in excess of 5 percent. Seven out
of the 10 fastest-growing countries in the last few years are in Africa.
This has created a growing middle class and a
flourishing financial sector. Savings are accumulating with institutional
investors such as pension funds and insurance companies.
Africa has the financial resources to play a
significant role in building African infrastructure, especially since domestic
capital markets are growing in several countries.
Domestic government bond markets are well
established and becoming increasingly sophisticated. In many markets,
non-government issuers are actively raising funds.
An opportunity for further innovation exists and
would be welcomed by the market. Several African countries today have given
priority to the issuance of "infrastructure bonds".
Many countries have been attracted by the example of
Kenya, which has launched infrastructure bonds both from the central government
and from state-owned enterprises such as KenGen.
The government of Kenya has led the way by
introducing certain tax advantages for investors buying such bonds. This has
helped to build interest in the institutional sector.
The report also elaborates on examples from other
emerging markets such as Chile, Brazil, Peru and Malaysia using project bonds
as a way to catalyse investors' interest in infrastructure projects. Such
examples can serve as a template for African countries on how to develop their
own markets.
During the launch, African Ministers of Finance and
central bank governors discussed how African markets could mobilise capital for
infrastructure projects, especially through African capital markets. They will
also discuss how policymakers and development institutions can help the
process.
Ends.
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