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THE African Development Bank (AfDB) says it will soon launch a non-sovereign operations (NSO) policy, which will render direct support to private sector development on the continent for the next 10 years.
NSO refers to financing and investment operations that are not guaranteed by a State, covering mostly private sector transactions.
They also cover non-sovereign financing of eligible public sector enterprises, as well as financing of regional development finance institutions.
AfDB said the proposed policy has been approved by its board of directors and is set for endorsement by wider membership next month. A workshop to inform participants about the policy stance on upholding private sector development in Africa is slated for January 2020.
“The NSO policy specifies the general framework within which the bank, through its private sector lending window, provides financing or investment without sovereign guarantees to private and public enterprises that meet particular eligibility requirements on non-concessional terms,” said the bank in a statement.
It is hoped that the NSO policy complements the bank’s overarching 2013 private sector development policy framework, notably, by defining what AfDB will do in the area of non-sovereign lending.
Within this context, the objective of the AfDB’s NSO is to help accelerate the continent’s transformation through various financial support mechanisms and products including loans, lines of credit, guarantees, blended finance, equity investments and trade finance.
This would enable the bank to contribute to the sustainable economic growth and inclusive social development of its regional member countries.
More specifically, the bank’s engagement in its selected non-sovereign operations will aim to maximise the catalytic impact of its limited resources, while seeking to promote inclusive growth and the gradual transition to ‘green growth’ in its RMCs.
Under the NSO policy, the regional financier would provide financing to NSO subject to four conditions namely, the borrower is a private enterprise or an eligible public sector enterprise; the operations are financially sound; the operations should result in satisfactory development outcomes, including supporting or creating opportunities for private sector development; and the bank brings additionally, which could be either financial or non-financial.
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