World Bank Approves $425 Million Towards Infrastructure Financing
The World Bank Board of Directors has approved a total of US$425 million in International Development Association (IDA) financing to support infrastructure development in the Eastern and Southern Africa through the Trade and Development Bank (TDB) and COMESA Secretariat.
This funding falls under the Regional Infrastructure Financing Facility Project (RIFF), which aims at expanding long-term finance to private firms in selected infrastructure in the power sector, as well as in the transport, logistics, and social sectors. This is the first regional facility of this kind in Africa. The new transactions will support regional integration and private sector development, and in turn, the sustainable socio-economic development of the region TDB serves.
TDB provides trade and project finance to its 22 member states, which includes countries from the wider COMESA-EAC-SADC Tripartite Free Trade Area, and will use the facility to diversify its long-term funding sources, sharpen focus on critical food and fuel imports, and facilitate imports of COVID-19 equipment and construction materials for healthcare facilities through its structured trade finance business.
Credit enhancement
This is the first time IDA and the Multilateral Investment Guarantee Agency (MIGA) – the political risk insurance and credit enhancement arm of the World Bank Group – are jointly supporting a regional development bank. MIGA is providing TDB a credit enhancement of EUR 334.4 million on a ten-year loan from private commercial banks, that will help TDB expand trade finance activities.
This guarantee provides protection to the lenders against the risk of Non-Honoring of Financial Obligations by a Regional Development Bank (‘NHFO-RDB’) and supports TDB’s access to commercial bank financing at longer tenors and lower interest rates than would otherwise have been available.
TDB has also attracted two new European funding partners with initial long-term funding of USD 80 million. They include a 10-year EUR 50 million term loan facility signed with Cassa Depositi e Prestiti (CDP), Italy’s Development Finance Institution, for on-lending to the private sector – particularly SMEs – located in some TDB Member States, and operating in agribusiness, social infrastructure, health, education, transports and logistics.
The other is similarly a 10-year USD 25 million term loan facility signed with the development bank of Austria, Oesterreichische Entwicklungsbank AG (OeEB). The funds will finance projects in various development areas such as renewable energy including hydro, windmills, solar, cogeneration and geothermal projects, energy efficiency in industry, housing, electricity transmission and distribution, as well as infrastructure, in TDB Member States.
President and Chief Executive Officer of the TDB Mr. Admassu Tadesse described the past quarter of this year as a season of new and expanded multilateral and bilateral partnerships on an unprecedented level.
“As depressing as COVID-19 has been, we as the unique COMESA family have in this crisis not locked-down – but rather gone into over-drive to do the needful,” he said. “My warm appreciations to the leadership and teams of COMESA who rallied brilliantly with TDB in these mutual groundbreaking facilities.”
He added: “Our TDB and COMESA flags are flying high and new Member States from beyond COMESA are continuing to knock on our doors. And as we are embracing the newcomers, in the spirit of the AfCFTA, we are dutifully preserving TDB’s character as a COMESA-based specialist regional bank, with membership and operations well beyond COMESA.”
Reacting to the positive developments, Secretary General of COMESA Chileshe Kapwepwe, congratulated the TDB for the new partnerships.
“As COMESA, we take immense pride in achievements of TDB as a COMESA institution which is actualizing the vision and foresight of our founding members of building strong institutions which can deliver our mandate for the benefit of the region,” she said.