AfDB, Africa50 secure $1 billion investment for sustainable development

21 Sep 2018, 12:00 am
Financial Nigeria

Summary

The impact investment of $1 billion is expected to increase funding for sustainable development and social progress across Africa.

President, African Development Bank, Akinwumi Adesina

The African Development Bank (AfDB) in partnership with European Commission's European Fund for Sustainable Development (EFSD), Africa50, Mizuho International and Mariner Investment Group (MIG) have secured an impact investment of $1 billion to increase funding for sustainable development and social progress across Africa. The investment portfolio, tagged: Room2Run, was announced in Ottawa, Canada on Tuesday.

According to a statement by the AfDB, Room2Run is the first-ever portfolio synthetic securitization between a multi-lateral development bank (MDB) and private sector investors. The transaction was made possible by MIG – the lead investor, Africa50, Mizuho International, and supported by the EFSD.

“Room2Run gives us fresh resources to invest in the projects Africans need most,” said Akinwumi Adesina, President of AfDB. “Africa has the most promise, the greatest natural resources, and the world’s youngest population. But we also have the world’s most persistent infrastructure deficits. The African Development Bank has the strategy to address these infrastructure finance gaps – and Room2Run gives us the capacity to make it happen.”

Room2Run transfers the credit risk on a portfolio of about 50 loans from the AfDB’s non-sovereign lending book, which includes power, transportation, manufacturing assets, and the financial sector. The AfDB has committed to redeploy freed-up capital into renewable energy projects in Sub-Saharan Africa, including projects in low income and fragile countries.

The portfolio spans the African continent, with exposure to borrowers in North Africa, West Africa, Central Africa, East Africa and Southern Africa. Room2Run directly responds to G20 calls for MDBs to use their existing resources to full capacity and share risk in their non-sovereign operations with private investors, through structured finance, credit guarantee programmes and hedging structures.

“Through Room2Run, we provide an additional protection to investments in the field of renewable energy,” said European Commissioner for International Cooperation and Development, Neven Mimica. “Through our guarantee, investment under Room2Run will translate into extending supply to many people currently without electricity while creating much-needed new jobs.”

Africa50 is an infrastructure investment platform that contributes to Africa's growth; while Mizuho International is a London-based corporate and investment bank; and Mariner Investment Group is a global asset management firm.


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