The African Development Bank has announced a $10 million (Ksh 1.52b) equity investment in a Dhamana Guarantee Company Limited to provide credit guarantees on long term debt held in local currencies in East Africa.
The firm which has its headquarters in Kenya is expected to leverage capital markets as an alternative source of long-term funding for infrastructure and the real sector in the region.
According to AfDB, the local currency bonds are intended to boost the credit rating of the instruments to crowd in investment from pension funds, insurance companies and sovereign wealth funds to finance infrastructure and the real sector in East Africa.
“The African Development Bank is pleased to continue to support the operationalization of innovative solutions such as those provided by Dhamana to unlock and channel long-term local currency funding towards the real sector,” said Nnenna Nwabufo, AfDB Director General for the East Africa.
Debt raised through the regional capital markets are expected to finance sectors such as transport, water, renewable energy, and waste management.
Additionally, Dhamana is expected to catalyze financing to assist the scale-up of green and sustainable financing into East Africa.
“This additional equity will allow Dhamana to further mobilise significant untapped pools of domestic institutional capital into East Africa’s real economy, such as new green infrastructure, and providers of credit to individuals and businesses,” said Philippe Valahu, PIDG Chief Executive Officer.
The bank joins other investors which include InfraCo Africa (part of the Private Infrastructure Development Group) and Financial Sector Deepening Africa.