Dakar, 29 November 2024 - The Africa Local Currency Bond Fund (ALCB Fund) and International Finance Corporation (IFC) have jointly invested XOF 10.5 billion (USD 16.8 million) in a XOF 20 billion (USD 32 million) Sustainability Bond issued by Baobab Senegal. The project was also supported by USAID Entrepreneurship & Investment.
Use of proceeds of the transaction are guided by the company’s sustainability bond framework, and will provide loans to over 5,000 micro, small and medium enterprises (MSMEs) in Senegal, including women-owned/led businesses, with robust reporting and monitoring obligations in alignment with International Capital Markets Association (ICMA) standards. The second party opinion was provided by MFR Global Ratings, and CGF Bourse acted as lead arranger. This transaction represents the first thematic bond in Senegal and the first sustainable bond in the West African Economic and Monetary Union (WAEMU) issued by the private sector.
The transaction was the outcome of a collaboration between the ALCB Fund, IFC, and U.S. Agency for International Development (USAID). IFC and USAID provided technical assistance to support the development of the sustainable bond framework, second party opinion, and general structuring of the overall transaction. The ALCB Fund provided financing on behalf of both the Fund and IFC, with IFC in turn providing a credit guarantee equal to 45% of the Fund’s investment(equal to their intended support).
The bond issuance was fully subscribed, with XOF 9.5 billion (USD 15.2million) raised form local institutional investors including regional development banks, pension funds, asset managers, insurance companies and individual investors. This is the ALCB Fund’s third investment in Baobab Senegal, having anchored the institution’s debut bond issuance in September 2016,and second issuance in June 2019.
Serigne Bamba Mbacke Diop, Deputy CEO, Baobab Senegal, said: “The funds raised through this transaction will support in meeting our long-term funding needs, and support the development of our lending activities towards microentrepreneurs in Senegal. Baobab Senegal is delighted to be the pioneer microfinance institution in issuing a Sustainability Bond in the UEMOA region. The success of this operation reflects the trust that our long-term partners, like the ALCB Fund, have in us and in our mission.”
Brock Hoback, Fund Lead of the ALCB Fund, Cygnum Capital, said: “This transaction cuts across the core mandate of the ALCB Fund in many unique ways. The use of proceeds aligns with the Fund’s mandate to channel private capital to low-income household and MSMEs, while the repeated issuances of Baobab (with increased volumes and sophistication each time) demonstrates that it has found the local debt capital market as an important and sustainable source of long-term funding and diversification. We thank the IFC and USAID for their constructive role in this transaction.”
Claude Owona, Regional Industry Manager, Financial Institutions, West Africa, IFC, said: “Strengthening local capital markets to mobilize financing for financial inclusion is apriority for IFC. Through this innovative financing structure, we are proud to see our long-term partnership with Baobab reach this new milestone. Providing sustainable funding to unserved and underserved entrepreneurs, especially micro and small enterprises and women-owned businesses, is critical for West Africa’s inclusive development.”
Dieynaba Thiam Ka, Chief of Party, USAID Entrepreneurship &Investment, said: “This project aligns with USAID’s commitment to supporting the Government of Senegal in its pursuit of inclusive and sustainable economic growth. By initiating and covering the design and placement fees, USAID, through, this transaction, will empower 5,000 women and youth – many of whom are traditionally unemployed or excluded from financial systems – by enabling them to transform challenges into thriving businesses in Senegal's priority sectors Having the support of two active investors in
