- CDC Group’s first risk sharing facility supporting local currency medium- and longer-term lending to MFIs and NBFI
- Boosts systemic liquidity in a highly credit-constrained environment and offers financial support to MSMEs and households in hard-to-reach markets
CDC Group, the UK’s development finance institution (DFI) and impact investor, today announces a new US$50 million risk-sharing facility with Absa Bank Limited (Absa). The commitment increases Absa’s capacity to offer financing solutions to Micro, Small and Medium Enterprises (MSMEs) and households across Sub-Saharan Africa through Microfinance Institutions & Non-Bank Financial Institutions (MFI & NBFIs).
This MFI and NBFI risk sharing facility is the first of its kind for CDC – supporting lending to these institutions (through credit risk mitigation) and allowing them to better serve households and MSMEs across Africa. The facility will enable Absa to deploy significant sums of capital and provide vital assistance to businesses and households in need of finance, helping them remain resilient and emerge from the crisis. Moreover, the investment forms part of CDC’s COVID-19 response and boosts systemic liquidity at a critical time when commercial lending is limited due to the economic challenges brought on by the pandemic.
This investment bolsters Absa’s strategy to promote responsible lending practices among MFIs & NBFIs in its portfolio and highlights opportunities within the financial inclusion segment – sending a positive signal to commercial banks to increase their lending to this segment of the economy where considerable funding needs remain unmet.
CDC has a long relationship with Absa, Sub-Saharan Africa’s third-largest bank, and this latest investment reinforces the partnership between both institutions. This facility builds on the existing trade finance partnership, helping to enhance access to funds in the markets, facilitate increased trading of goods and services, and deepen financial inclusion among underserved communities and individuals across Africa’s markets.
Stephen Priestley, Managing Director, Head of Financial Services, at CDC Group, said:
“We are thrilled to once again partner with Absa. This is CDC’s first risk-sharing facility that provides a local currency solution to MSMEs and local households. We are confident that CDC’s counter-cyclical funding will provide much needed support to local financial institutions by diversifying their funding base and enhancing their ability to provide smaller loans to local businesses and hard-to-reach communities. CDC remains committed to ensuring that businesses and people have greater access to the financial support needed to enable them to grow and remain resilient throughout the crisis.”
Anand Naidoo, Managing Executive: Client Coverage, Absa Corporate and Investment Banking said: “We are proud to have built this partnership with CDC, which does not only bring value to the relationship but is also aligned to our overall business strategy. This facility is another proof point in the execution of our shared growth strategy which focuses on providing finance and assisting clients to achieve sustainable economic growth in the markets where we operate.
“The framework details the use of proceeds, the process for project evaluation and selection, the ongoing management of proceeds as well as the reporting and transparency. There is a definite trend from global investors to invest in more socially responsible projects and companies because they want to see that their funds are being invested in activities that promote sustainable economic growth.”
Notes to Editors
Absa Group Media Relations
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- CDC Group is the UK’s first impact investor with over 70 years of experience of successfully supporting the sustainable, long-term growth of businesses in South Asia and Africa.
- CDC is a leading player in the fight against climate change and a UK champion of the UN’s Sustainable Development Goals – the global blueprint to achieve a better and more sustainable future for us all.
- The company has investments in over 1,200 businesses in emerging economies and a total portfolio value of $6.2bn. This year CDC will aim to invest over $1.75bn in companies in Africa and Asia with a focus on fighting climate change, empowering women and creating new jobs and opportunities for millions of people.
- CDC is funded by the UK government and all proceeds from its investments are reinvested to improve the lives of millions of people in Africa and South Asia.
- CDC’s expertise makes it the perfect partner for private investors looking to devote capital to making a measurable environmental and social impact in countries most in need of investment.
About Absa Group Limited
Absa Group Limited (‘Absa Group’) is listed on the Johannesburg Stock Exchange and is one of Africa’s largest diversified financial services groups.
Absa Group offers an integrated set of products and services across personal and business banking, corporate and investment banking, wealth and investment management and insurance.
Absa operates in 14 countries. The Group owns majority stakes in banks in Botswana, Ghana, Kenya, Mauritius, Mozambique, Seychelles, South Africa, Tanzania (Absa Bank Tanzania and National Bank of Commerce), Uganda and Zambia and has insurance operations in Botswana, Kenya, Mozambique, South Africa and Zambia. Absa also has representative offices in Namibia and Nigeria, and securities entities in the United Kingdom and the United States.
For further information about Absa Group Limited, please visit www.absa.africa