The African Local Currency Bond (ALCB) Fund

Convergence

The African Local Currency Bond (ALCB) Fund provides anchor investment and technical assistance to first-time or innovative local currency bond issuances from financial institutions and companies operating in developmental sectors in African countries. As of June 2017, the ALCB Fund had invested in 18 bond issuances across 14 companies in nine countries, including Botswana, Ghana, Kenya, Cote D’Ivoire and Zambia.

The ALCB Fund was initially designed, capitalized, and managed by the German Development Bank, KfW. After two years of operation, KfW determined that the ALCB Fund was ready to scale and hired a fund manager in 2015. The fund manager, Lion’s Head Global Partners (LHGP), was responsible for implementing an institutional upgrade and growing the Fund. The Fund is currently fundraising equity and senior debt, and has successfully raised capital from various developmental and impact investors.

ALCB Fund’s design and fundraising approach presents useful insights for others considering structuring or investing in similar structures, including:

  • Blended finance structures need to have a balanced approach to additionality and impact
  • There is a trade-off between making capital accessible to potential clients and putting appropriate hedges in place
  • Determining the additionality and the proper pricing of an anchor investment is more of an art than a science
  • A ‘proof of concept’ approach to fund development can achieve both innovation and scale
  • Technical assistance can ease the upfront cost of fundraising efforts
    Date
    06 December, 2017
    Type
    Case Studies
    Region Focus
    Central Africa, East Africa, North Africa, Southern Africa, West Africa
    Sector Focus
    Financial Services
    Sub-Sector Focus
    Capital Markets