The African Development Bank (AfDB) has approved a seed equity capital investment of Sh2.5 billion ($25million) into the African Domestic Bond Fund (ADBF).
The fund was formed by the multilateral lender as part of the African Financial Markets Initiative (AFMI) in 2008, meant to be invested in African local currency-denominated state bonds and encourage investors to do the same.
“The ADBF aims to stimulate the development of African domestic bond markets through the provision of an innovative and efficient product in the form of an enhanced Index Bond Fund to broaden investor’s participation,” said Charles Boamah, the bank finance vice-president and chairman of AFMI.
The ADBF seeks to reduce Africa’s dependency on foreign currency-denominated debt and encourage the deepening of domestic bond markets besides enlarging the investor base in domestic bond markets.
The fund is structured as an enhanced Exchange Traded Fund (ETF) listed in Mauritius, but will also be listed in other stock exchanges in order to invite other investors to invest in the fund.