Increased access to finance for small and mid-sized businesses in Africa will support domestic capital markets, drive economic growth and create jobs but will also ultimately force investors and the private sector to demand better regulatory laws and transparency from business leaders and government officials.

It takes financial investments to build better economies and robust economics produce good returns on investments for investors. It’s a win-win situation.

International Financial Corporation, a member of the World Bank group, has made that connection. The financial group said it has issued a $28.4 million bond—equivalent to approximately 150 million kwacha—to support domestic capital markets and increase access to local-currency finance in Zambia.

“Vibrant domestic capital markets create access to long-term, local-currency finance for the private sector—the key engine of job creation in emerging markets,” said Jingdong Hua, IFC vice president and treasurer. “The IFC Zambezi bond supports our efforts to deepen domestic capital markets in Africa, so they can sustain a thriving private sector in the region.”

The issue, dubbed “Zambezi” bond, is IFC’s first kwacha-denominated bond. It is also the first placement by a nonresident issuer in Zambia’s domestic capital markets and the first issuance under the IFC Pan-Africa Domestic Medium Term Note Program, which was launched in May 2012 to focus on Botswana, Ghana, Kenya, Namibia, Rwanda, South Africa, Uganda and Zambia.

In July, IFC received approval to issue a local-currency bond program in Zambia. Under the program IFC can issue bonds of up to$460 million (approximately2.5 billion Zambian kwachas). Standard Bank and Stockbrokers Zambia Ltd. are co-lead arrangers for the program.

The four-year bond is designed to appeal to a broad range of domestic and international investors looking to diversify their portfolios. The order book was over 700 million kwacha, equivalent to an oversubscription of 4.8 times.

Investors include Zambian pension funds, international and domestic asset managers, insurance companies and banks. The bond was issued at par and priced with a yield of 15 percent p.a.

Proceeds from the program are expected to be used to support IFC’s private sector development program.

Oumar Seydi, IFC’s director for Eastern and Southern Africa said in a statement, “The IFC Zambezi bond supports the efforts of the government and authorities to deepen domestic capital markets in Zambia. Such markets are an important source of local-currency funding, in line with IFC’s strategy for broader private sector development through micro, small and medium enterprises and other essential economic sectors.”


September 24, 2013