The Board of Directors of the African Development Bank Group has given the green light to a $10 million equity investment in Dhamana Guarantee Company Limited. This move aims to bolster the utilization of capital markets as an alternative avenue for long-term funding in East Africa’s infrastructure and the real sector.
Dhamana Guarantee Company will be established as a limited liability company based in Kenya with a regional mandate. The primary objective is to provide credit guarantees on debt capital market instruments. With the financial support from the Bank Group, Dhamana will issue guarantees for debt instruments, particularly local currency bonds. These bonds are strategically designed to enhance the credit rating of the instruments, attracting investment from pension funds, insurance companies, and sovereign wealth funds. The influx of funds will be directed towards financing critical infrastructure and the real sector in East Africa.
Collaborating with InfraCo Africa (a part of the Private Infrastructure Development Group), Financial Sector Deepening Africa, local institutional investors, and other partners, the African Development Bank will contribute to the operationalization of Dhamana.
Dhamana’s mission is to facilitate access to financing for vital sectors such as transport, water, renewable energy, and waste management. The company is committed to catalyzing financing that supports the expansion of green and sustainable initiatives in East Africa. Through its credit guarantee activities, Dhamana aims to provide investors with the confidence needed to encourage the allocation and intermediation of private institutional investors’ funding into infrastructure projects.
Nnenna Nwabufo, African Development Bank Director General for the East Africa region, expressed satisfaction with the ongoing support for innovative solutions like Dhamana. The goal is to unlock and channel long-term local currency funding into the real sector.
Philippe Valahu, PIDG’s CEO, highlighted the significance of the African Development Bank joining PIDG in supporting Dhamana. The additional equity injection is expected to empower Dhamana to tap into untapped pools of domestic institutional capital for East Africa’s real economy, including green infrastructure projects.
Ahmed Attout, African Development Bank Acting Director for Financial Sector Development, emphasized the catalytic role of guarantee companies in promoting real sector and infrastructure financing. The Bank’s investment in Dhamana aligns with its priorities to mobilize institutional financing for infrastructure investment in East Africa.
This partnership between the Bank and Dhamana advances various strategic objectives, including stimulating local currency debt market financing, fostering economic diversification and competitiveness, promoting regional integration, and supporting inclusive and sustainable industrialization. The investment is in line with the African Development Bank’s strategic efforts, in collaboration with partners like PIDG, to operationalize credit enhancement companies in selected Regional Member Countries.
Photo (AFDB)
21st November, 2023
Delino Gayweh
Serrari Financial Analyst
