AfDB Launches Low Rate ‘Fight COVID-19’ Social Bond

Akinwumi Adesina, AfDB president

African Development Bank has launched a record breaking $3 billion “Fight COVID-19” Social Bond for African countries, whose economies are currently largely under a slow down as a result of the global pandemic.

The new bond meant to help the continental business recovery from Coronavirus, follows another ‘Corona Bond’ proposed yesterday by the Italian government to the rest of Europe.

“The bond to help alleviate the economic and social impact the Covid-19 pandemic will have on livelihoods and Africa’s economies,” The African bank said in a statement this March 29.

The Fight Covid-19 Social bond, with a three-year maturity, was launched this Sunday and has already grabbed interest from African central banks and official institutions, bank treasuries, and asset managers including Socially Responsible Investors, with bids exceeding $4.6 billion.

“This is the largest dollar denominated Social Bond ever launched in international capital markets to date, and the largest US Dollar benchmark ever issued by the Bank. It will pay an interest rate of 0.75%,” the bank said.

The Bank established its Social Bond framework in 2017 and raised the equivalent of $2 billion through issuances denominated in Euro and Norwegian krone. In 2018 the Bank was designated by financial markets, ‘Second most impressive social or sustainability bond issuer” at the Global Capital SRI Awards.

The “Fight Covid-19” bond was allocated to central banks and official institutions (53%), bank treasuries (27%) and asset managers (20%). Final bond distribution statistics were as follows: Europe (37%), Americas (36%), Asia (17%), Africa (8 %,) and Middle-East (1%).

Through this bond, the bank said it is partly, moving to provide flexible responses aimed at lessening the severe economic and social impact of this pandemic on its regional member countries and Africa’s private sector.

Coronavirus cases were slow to arrive in Africa, but the virus is spreading quickly and has infected nearly 3,000 people across 45 countries, placing strain on already fragile health systems.

Most African countries have recognized that with the presence of Covid-19, these are critical times for Africa of which the African Development Bank said it is taking bold measures to support African countries.

“This $3 billion Covid-19 bond issuance is the first part of our comprehensive response that will soon be announced. This is indeed the largest dollar social bond transaction to date in capital markets. We are here for Africa, and we will provide significant rapid support for countries,” said Dr. Akinwumi Adesina, President of AfDB Group.

It is estimated that the continent will require many billions of dollars to cushion the impact of the disease as many countries scrambled contingency measures, including commercial lockdowns in desperate efforts to contain it.

On the Rwandan side, the country is yet to confirm its subscription to the bond but experts says it has a good cause.

“The interest is very low (of 0.75%) compared to other bonds, but we have to know that most markets are down in this period and investor funds are lying redundant in the banks. So it would be better, to invest their money is such a bond which has a good cause, intended to help African economies,” said Robert Twahirwa, the Rwanda Stock Exchange (RSE) Head of Information Technology & Operations.




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