London, 23 October 2024 - The ALCB Fund has concluded a TZS 27.2 billion (USD 10 million) investment in a privately placed senior unsecured bond issued by National Bank of Commerce (NBC),Tanzania. The proceeds of the bond will facilitate loans to micro, small and medium enterprises (MSMEs) in Tanzania and enable NBC to further expand its financial services to businesses and individuals throughout the country.
This investment is supported by a grant from TCX through its EU Market Creation Pricing Facility, aimed at promoting the use of local currency in development finance. In markets where high hedging costs can make local currency financing difficult for international lenders, the facility reduces the burden, making a local currency issuance with foreign institutional participation feasible. By issuing the bond in local currency, NBC is also shielded from any exposure to foreign exchange risks, ensuring more stable and sustainable growth.
The Fund’s investment in NBC continues its track record of supporting African financial institutions through the development of local currency bond markets, helping to promote long-term financial resilience in African economies.
Fola Pedro, Senior Investment Officer of the ALCB Fund, commented:
"This investment in National Bank of Commerce’s local currency bond highlights our commitment to advancing capital market development across Africa. By supporting NBC’s bond issuance, the bank can continue to extend crucial financial services, contribute to the local economy and enhance financial inclusion across Tanzania”.
Theobald Sabi, Managing Director of National Bank of Commerce, stated:
"We are proud to welcome the ALCB Fund as a strategic investor in NBC. This investment demonstrates the trust investors place in our expertise and leadership in advancing financial inclusion and empowering communities. It aligns with our mission to drive economic development by creating new opportunities through innovative and affordable financial solutions. This transaction will strengthen the SME sector, which employs the majority of our population, by expanding access to finance and unlocking growth opportunities. By utilizing local currency funding, we are mitigating exchange rate risks, ensuring stable, affordable and accessible financing for all."
Ruurd Brouwer, CEO of TCX, added:
"It is TCX's pleasure to provide the currency risk solution for this investment with the support of the EU Market Creation Pricing Facility. The 5-year bullet bond in TZS is an impactful issuance that contributes to Tanzania’s local capital market development. With no other party offering a hedge for this tenor, TCX stepped in to take on the currency risk in line with its development impact mandate. Additionally, the EU Market Creation Pricing Facility helped reduce the cost of hedging and supported the participation of an international investor in a local currency domestic bond issuance."
