AfDB receives global recognition for inaugural hybrid capital issuance

The African Development Bank (AfDB) Group, has received a global recognition for its inaugural hybrid capital issuance, positioning the Bank as a pioneer in innovative sustainable financing.

In a statement issued by the bank, the S and P Global Ratings, assigned an AA-rating to the debut transaction, which it described as the highest rating for hybrid capital.

According to the statement, the proposed issuance will be the first ever by a multilateral development bank.

Our correspondent reports that hybrid capital will have a multiplier effect on the bank’s financing.

It will allow the issuance of additional green, social and sustainable bonds to finance projects targeting some of the continent’s most critical development challenges.

These include food security, access to water and health services, and climate change.

According to the AfDB’s President, Dr Akinwumi Adesina, global and regional multilateral development banks are being asked to change their business models.

Adesina said the development banks had also been asked to leverage more financing at scale, to tackle climate change and accelerate development.

“The AfDB is a pioneer in financial innovations. Our decision to issue hybrid capital will allow us to leverage more financing from capital markets.

“This will further accelerate Africa’s growth and development,” Adesina said.

Adesina expressed delight at the historic achievement by the bank.

He said: “we will continue to respond and lead with financial innovations in response to the need to leverage more financing.

“This is in regards to the global calls for reforms of the global financial architecture,” the bank chief said.

According to the S and P, the AfDB is the first Multilateral Lending Institution (MLI) to incorporate hybrid capital into its capital structure.

“The bank’s hybrid capital initiative has garnered global attention, including from the G20 Capital Adequacy Experts group, which has recommended that other multilateral development banks also explore hybrid capital instruments.”

The AfDB’s Vice President for Finance and Chief Financial Officer, Hassatou N’Sele, said “hybrid capital is a combination of debt and equity that complements rather than replaces these two sources of finance.”

“It is an established financing instrument that is widely used by corporates, financial institutions, insurance companies, and agencies, but has not yet been used by multilateral development banks.

“This is another way to bolster an MDB capital base and optimise its balance sheet.

“And the AfDB is starting a new asset class, hybrid capital issued by AAA-rated multilateral development banks.”