Institutional backer contributes $30 million to ALCB in initial private funding round
The African Local Currency Bond (ALCB) Fund, a pioneering investment vehicle focused on mobilising private capital for the Sustainable Development Goals (SDGs), has successfully raised $30m (€25.6m) from an unnamed UK-based insurance company. The bond, issued under the ALCB Fund's Euro Medium Term Note (EMTN) program, was completed with HSBC Continental Europe acting as a dealer, and the notes are listed on The International Stock Exchange.
The ALCB Fund's strategy is twofold. First, it aims to finance African infrastructure and development projects aligned with the SDGs. Second, it seeks to reduce dependency on foreign currency debt and mitigate exchange rate risks common in African economies by mobilising private capital through local currency financing.
Institutional investors play a crucial role in the ALCB Fund's mission. Their participation provides large, stable pools of capital necessary for substantial infrastructure and development projects. It also helps deepen local capital markets, encourages further issuances, and improves market liquidity. Institutional investors bring expertise and risk assessment frameworks, increasing confidence in project viability and sustainability, which can attract additional private capital. Moreover, their mandates or incentives often support sustainable development, making their involvement critical to scaling up funding for SDG-aligned projects.
The bond issuance by the ALCB Fund was considered a significant step forward for its strategy to attract institutional investors. The Moody's Baa1 rating, which played a crucial role in attracting institutional investors, made the bond the second-highest rated Africa-focused investor, after the Africa Finance Corporation.
Robert Anson, vice president of debt syndicate at HSBC, expressed delight in supporting the ALCB Fund and attracting institutional capital to African markets. He also stated that the transaction showcases the potential of international bond markets to mobilize private investment for good causes.
Since its foundation in 2012, the ALCB Fund has deployed over $420m, backing 67 companies across various sectors in Africa. The sectors include financial inclusion, renewable energy, affordable housing, and other critical sectors. The ALCB Fund has had write-off ratios of less than 2% since its inception and has achieved a 9.1x private capital mobilisation ratio, meaning that for every dollar it invested, an additional $9.10 was mobilised from local investors.
Getting the bond fully subscribed by the fund's first private institutional investor is considered a "significant step forward" for this strategy. The ALCB Fund is managed by Cygnum Capital, an emerging markets-focused investment bank and asset management firm. The fund's representative, Hoback, stated that the local currency mandate reduces credit risk.
In broader context, mobilising private capital through local currency financing mitigates exchange rate exposure and fosters financial inclusion, as shown by initiatives in Rwanda's healthcare bond market supporting capital market deepening and domestic resource mobilization. Development finance institutions (DFIs) and multilateral development banks (MDBs) also play a vital role by providing guarantees, advisory, and co-financing that catalyse private investments in infrastructure aligned with climate and development goals. The African Local Currency Bond Fund thus represents an important mechanism for combining local financial market development with mobilising private sector capital toward Africa’s SDGs.
The African Local Currency Bond (ALCB) Fund, having attracted a $30m investment from an unnamed UK-based insurance company, now aims to leverage this capital for financing African infrastructure and development projects aligned with the SDGs. The institutional investor's participation provides large, stable pools of capital for substantial projects, deepens local capital markets, and encourages further issuances. The ALCB Fund's strategy to attract institutional investors has gained momentum with the Moody's Baa1 rating, making it the second-highest rated Africa-focused investor, after the Africa Finance Corporation.
The ALCB Fund's local currency financing strategy, managed by Cygnum Capital, mitigates exchange rate risks common in African economies and reduces credit risk. The fund has deployed over $420m since its inception, backing 67 companies across various sectors such as financial inclusion, renewable energy, affordable housing, and others. Notably, the ALCB Fund's write-off ratios have remained under 2% and it has achieved a 9.1x private capital mobilisation ratio.
In addition to private sector investments, development finance institutions (DFIs) and multilateral development banks (MDBs) provide crucial support through guarantees, advisory, and co-financing, catalyzing private investments in infrastructure aligned with climate and development goals. The ALCB Fund, therefore, represents an important mechanism for combining local financial market development with mobilizing private sector capital towards Africa’s SDGs, demonstrating the potential of international bond markets to mobilize private investment for good causes.
Moreover, the ALCB Fund's local currency financing initiatives, like its participation in Rwanda's healthcare bond market, foster financial inclusion, support capital market deepening, and promote domestic resource mobilization, thus furthering the fund's mission of sustainably developing Africa.