EADB wants to raise $120m

HEADQUARTERS: EADB officials informed the Council of Ministers last month in Arusha.

ARUSHA, Tanzania – The Council of Ministers that met in Arusha recently was informed that the East African Development Bank (EADB) has plans to raise $120 million from its four member countries in their respective currencies and in US dollars.

The issuance will be the first to take advantage of the harmonised capital markets regulatory regime.

The meeting took place from September 15 – 20, 2014. However, the process has been slowed by the unfavourable market conditions, but the EADB is in frequent discussions with a number of institutions about opening new short and long-term maturity facilities.

In a communiqué to East African Business Week the institutions mentioned include Development Bank of South Africa (DBSA), Development Bank of Kenya, Nordic Investment Fund, Swedish International Development Authority (SIDA), Standard Chartered Bank Tanzania and DFCU Bank Limited.

Since 2012 the Bank has embarked on successful resource mobilisation strategy as in 2012 the European Investment Bank provided line of credit of Euro 25 million whereas in 2013, the AfDB, the largest investor-grade shareholder of EADB, increased its participation in the bank by committing $24 million in equity investment.

Out of that $10 million has been paid in with the balance in the form of callable capital. During the years 2014/15, The Bank expects to mobilise $75 million from the African Development Bank, OPEC Fund for International Development and Exim Bank of India.

According to the communiqué, the Council was informed that the Bank is in its third phase, “the Growth Phase”, of Strategic Plan 2011-2015 and the turnaround since 2010 has been robust supported by shareholders capital and rising profitability since 2009, the Bank’s net worth (including shares not allotted) increased by 95% from 2010.

There is notably improved efficiency as cost to income ratio declined to 47% as compared to 78% (2010). The total usable equity (excluding callable capital) more than fully covered the investment portfolio, representing 165% of the sum of gross loans outstanding and equity operations, compared to 33% in 2007.

This is one of the highest rates among multilateral development banks. Downsizing of the portfolio through aggressive debt collection saw the non-performing loans declining to record low levels of 1.4% by June 2014.

In recognition of these achievements the Bank has received favorable rating from international and regional rating institutions. The Director General of EADB was, in May 2014, awarded the African Banker of year.

The Bank has plan to raise the equivalent of $120 million from its four Member Countries in their respective currencies and in US Dollars whereby the issuance will be the first to take advantage of the harmonised capital markets regulatory regime.

The process has been slowed down by the unfavourable market conditions as the Bank is frequently in discussions with a number of institutions about opening new short and long-term maturity facilities.

“The institutions include Development Bank of South Africa (DBSA), Development Bank of Kenya, Nordic Investment Fund, Swedish International Development Authority (SIDA), Standard Chartered Bank Tanzania and DFCU Bank Limited,” reads part of the report.

During the five year period Fitch, Moody’s, Global Credit Rating Company and AADFIs have rated the EADB positively as in June 2014, Moody’s Investor Service maintained the Bank’s long term issuer rating at Ba1 with stable outlook, same rating as achieved in 2013.

In May 2014 the Board of Directors of the EADB reviewed Burundi’s request to join the Bank and authorised Management to engage a professional firm to undertake the bank valuation with the view of admitting the Republic of Burundi.

The process of recruiting the firm is at advanced stage and the Board also recommended to the Governing Council to increase the authorized Class “A” paid in shares by 8000 shares in order to accommodate the subscription of the Republic of Burundi. The Governing Council will deliberate on increasing authorised share during the next Governing Council meeting.

The Bank has been designated by the EAC to host the Regional Public Private Partnership (PPP) Resource Centre and to manage the East African Development Fund and currently the Bank is working with the EAC Secretariat to finalise the Legal Framework for establishment of the Fund.

Furthermore, the Bank is the beneficiary of a technical assistance (TA) from the Fund for African Private Sector Assistance (FAPA) provided through the African Development Bank (AfDB).

The main goal of the TA is to strengthen EADB’s capacity and ability to deliver on its development mandate more effectively. This assistance is intended to boost EADB’s ability to promote the development of the private sector, especially the SMEs. The project commenced in March 2014 and would likely end by Mid-2015.

By Timothy Kitundu, Sunday, October 05th, 2014


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