AfDB and Partners Sign Agreement for Groundbreaking Multi-Originator Synthetic Securitization to Drive Sustainable Growth in Africa

New Initiative Aims to Mobilize Private Capital for High-Impact Development Projects, Expanding Financing for Africa's Infrastructure and Climate Goals.

At the Africa Investment Forum 2024 Market Days in Rabat, Morocco, the African Development Bank Group (AfDB), together with the Development Bank of Southern Africa (DBSA) and prominent institutional investors, signed a Letter of Intent to explore the creation of a multi-originator synthetic securitization transaction. This significant partnership aims to increase private sector participation in financing Africa’s critical development sectors, including climate finance, infrastructure, and financial intermediation.

The signing, which took place on December 4, 2024, marks a milestone in the African Development Bank’s Ten-Year Strategy 2024-2032, focusing on private capital mobilization and de-risking as central themes to accelerate the delivery of the Sustainable Development Goals (SDGs).

This new initiative builds on the success of AfDB’s inaugural $1 billion synthetic securitization transaction under its Room to Run Program in 2018. The proposed multi-originator platform is designed as a revolving, evergreen vehicle that will de-risk the balance sheets of development finance institutions (DFIs) operating in Africa while offering attractive returns for private sector investors.

A Stronger, More Diverse Investment Portfolio

The multi-originator platform aims to feature a reference portfolio of $1.5-2 billion, with a diverse mix of assets spread across sectors, geographies, and risk profiles. It will include loan and guarantee exposures that align with the shared priorities of the AfDB and DBSA, particularly in sectors crucial for sustainable development, such as climate finance and infrastructure. This diversified composition ensures the platform is appealing to a broad spectrum of investors, particularly those seeking to invest in high-impact development projects.

By focusing on transferring mezzanine tranche credit risks to private sector investors, the platform enables the AfDB and DBSA to retain senior tranche risk, thus unlocking additional lending capacity. This mechanism will provide much-needed capital relief on a revolving basis, ensuring the continued support of critical development initiatives.

High-Level Support for the Initiative

Dr. Akinwumi Adesina, President of the African Development Bank, emphasized the transformative potential of the new platform, noting, “This initiative exemplifies how collaboration between multilateral development banks and private sector investors can unlock transformative capital flows to address Africa’s financing gaps.”

The DBSA’s CEO Boitumelo Mosako also stressed the importance of multilateral development institutions, asset managers, and institutional investors working collaboratively to scale up financing for Africa’s growth, saying, “It is imperative that we work as a system to make financing available for Africa’s growth.”

Institutional Investors Celebrate the Opportunity

Key institutional investors, including Academy Securities, Newmarket, and Africa50, have expressed strong support for the platform. Molly Whitehouse, Co-Founder and Managing Director of Newmarket, who was also involved in the successful Room2Run transaction, said, “We are excited about the growing opportunities in the MDB sector. The SST platform will help extend the success of Room2Run and strengthen our partnership with AfDB and DBSA.”

Dan Schaeffer, Executive Director of ABS Capital Markets at Academy Securities, noted the significance of the initiative in encouraging ESG and sustainable lending across Africa, adding, “This signing showcases the innovative spirit of the Africa Investment Forum and our commitment to delivering impactful solutions to emerging market development challenges.”

Meanwhile, Alain Ebobissé, CEO of Africa50, echoed the sentiment, highlighting the success of the original Room2Run investment and the importance of this initiative in addressing Africa’s infrastructure gap: “This is a pivotal opportunity to free up vital capital for Africa’s development.”

A Platform for Transformative Change

The Africa Investment Forum, a multi-stakeholder platform aimed at advancing projects to bankable stages and accelerating financial closures, will play a critical role in facilitating the mobilization of capital for Africa’s development priorities. The partnership’s focus on leveraging private sector investment to address infrastructure, climate, and other critical sectors aligns with the AfDB’s High 5s and the African Union’s Agenda 2063, ensuring that the initiative contributes directly to the realization of the Sustainable Development Goals.

This innovative multi-originator synthetic securitization platform is poised to catalyze sustainable economic growth across Africa, while building a more resilient, inclusive future for the continent.