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Financial ProductsFinancial Products
Treasury DepartmentFinancial Services Division
AFRICAN DEVELOPMENT BANK 2
Through these Windows, the Bank Group Addresses the Diverse Needs of African Countries
African Development Bank– Market-based lending terms
African Development Fund– Grants
– Concessional loans, up to 50 years maturity including 10-year grace period
– Service charge of 0.75% per annum and commitment fee of 0.50 % per annum on undisbursed amount
Nigeria Trust Fund
– Semi-concessional loans
– USD only, 25 years, 2-4%
Technical Assistance Funds– MIC Trust Fund
– EPSA (Japan)
– Bi-lateral
Eligible to ADB funding (13 countries)
Eligible to ADF funding (38 countries)
Eligible to ADB and ADF funding (2 countries)
AFRICAN DEVELOPMENT BANK 3
ADB Group
ADBDebt Funded
ADFDonor funded
Sovgn & Sovgn G’teed (15
MICs)
Non-Sovgn G’teed
Public Sector
(15 MICs)
Private Sector (All)
INTERVENTION INSTRUMENTS
Policy based, Sector / Structural adjustment, Project, Sector Wide Approaches, Technical Assistance
FINANCIAL PRODUCTS
Loans, LOCs, Guarantees, Agency Lines, Equity, Risk Management Products
FINANCIAL PRODUCTS
Grants, Concessional Loans / LOCs
Sovgn G’teed (40)
NTFNigeria funded
Sovgn G’teed (All)
Project Loans
USD, 25 years, 2-4%
AFRICAN DEVELOPMENT BANK 4
Financial Products Classified into Four Main Groups
Loan products
Risk management products
Guarantees
Equity participation or quasi-equity
Introduced for Flexibility of RMCs
AFRICAN DEVELOPMENT BANK 5
Loan Products
Selection of currencies US$, €, Yen & ZAR
Selection of interest rate bases
Floating 6-month LIBOR, EURIBOR, JIBAR
Fixed Amortizing swap, computed from market rates Choices of rate fixing dates
– Each disbursement
– Bank floating rate reset dates
– Final disbursement
– Dates decided by borrower
Variable Weighted average cost of funding pool in that currency
AFRICAN DEVELOPMENT BANK 6
Loan Pricing
Pricing Methodology Lending Rate = Base Rate + Lending Spread Fees
Sovereign Guaranteed Non-sovereign Guaranteed
Lending Spread 40 bp Risk based
Front-end Fee None 0 - 1%
Commitment Fee
None 0 – 1%, accruing 60 days after loan signature
Appraisal Fee None Case by case
Pre-payment premium
Fixed and Variable rate only Fixed and Variable rate only
Maturity Up to 20 years, 5 years grace Up to 15 years, 5 years grace
Repayment Generally equal Amortization, others permitted
Generally equal Amortization, others permitted
AFRICAN DEVELOPMENT BANK 7
Non-sovereign Guaranteed Loan Pricing
ConsiderationsCredit ratingCo-financier pricingCompetitive positionMaturity
AFRICAN DEVELOPMENT BANK 8
Lending in Local Currencies
Framework recently approved
Rationale Revenues denominated primarily in local currency Eliminate foreign currency risk Contribute to reducing financial sector and overall economic risk exposure (FX and
maturity risk for borrowers and financial institutions)
Issues Loans - limited to financing local expenditures (Article 16 restriction) Ability to raise local currency resources
Bond issues Swaps Guarantees
Risk Management Asset – liability management Warehousing & cost of carry
AFRICAN DEVELOPMENT BANK 9
Risk Management Products (RMP)
Reduce client financial risks and enhance the Bank’s own risk profile, financial integrity and intermediation capacity
Respond to customer needs according to their risk profile
Offer instruments that are not normally available To most clients due to credit issues In adequate sizes In long maturities At competitive prices
Bank is intermediary in all these transactions
Market based products
Use reserved for borrowers who have demonstrated a good
understanding of these products
AFRICAN DEVELOPMENT BANK 10
Risk Management Products Available
Cap, Floor and Collar
Fee: 12.5 basis points on total amount hedged
Interest Rate Swap
Fee: 12.5 basis points on total amount hedged
Currency Swap
Fee: 25 basis points on total amount hedged
Commodity linked hedge
Fee: 37.5 basis points on total amount hedged
USD LIBOR 6m
0.801.301.802.302.803.303.80
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Dates
Cap at 1.80%
AFRICAN DEVELOPMENT BANK 11
Guarantees
Assist borrower to obtain additional financing from banks and capital markets (domestic and international)
Priced similarly to the credit spread on equivalent loans
Help borrower to mobilize resources in local currency
Partial credit guaranteeCovers portion of debt against all risksUsed to extend/reinforce credit on longer maturities
Partial risk guarantee
Protection against selected political risks, e.g. monetary convertibility, currency transfer, regulatory risk, expropriation and non-performance of contractual commitments by government or government agencies
Counter-guarantee requirementFor sovereign operations, the Bank may require, as for loans, a counter-guarantee
from member country where project is located
AFRICAN DEVELOPMENT BANK 12
A Range of Equity and Quasi-Equity Instruments is also Available
The Bank will not take majority shareholder i.e. controlling interest
The Bank will seek board representation
Need for clear exit strategy
Types of equity participation
Direct purchase of equity
Indirect, through investment funds (e.g. regional or sector specific)
Quasi equity
Redeemable preferred stock
Convertible debt e.g debentures
AFRICAN DEVELOPMENT BANK 13
ADF Loans
Maturity up to 50 years;
Grace Period up to 10 years;
Service charge: 0.75% per annum on disbursed and outstanding amount;
Commitment fee: 0.50% per annum on undisbursed amount accruing 120 days after loan signature;
Principal Repayment:
1% of the principal per annum from the 11th to 20th year;
3% of the principal per annum from the 21st to 50th year.
ADF Line of Credit Maturity up to 20 years;
Grace period up to 5 years;
Service charge: 0.75% per annum on disbursed and outstanding amount;
Commitment fee: 0.50% per annum on undisbursed amount accruing 120 days after loan signature.
ADF Lending Terms
AFRICAN DEVELOPMENT BANK 14
ADF Currency Choice
Borrowers can select disbursement currency
Condition: effective for new loans negotiated after 23 June 2005
Currencies available: EUR, USD, JPY & GBP (currencies of SDR basket)
Choice: at loan signature
Loan remains denominated in Unit of Account (UA)
Repayment: in currency disbursed
AFRICAN DEVELOPMENT BANK 15
CONTACT LIST
TREASURY DEPARTMENT, TUNIS:
Marie-Laure Akin-Olugbade, Principal Financial Analyst, Officer in Charge,
Financial Technical Services Division [email protected], Tel: (216)
7110 2453
Samuel Mivedor, Principal Financial Analyst [email protected],
(Tel) 216 7110 2434
ADB OFFICE MAPUTO: Willye Mai King, Country Program Officer
