AfDB board approves non-sovereign operations policy

The African Development Bank Group has announce that its board of directors has approved its policy on non-sovereign operations (NSO).

The policy represents the framework within which the AfDB through its private sector lending window may provide financing or investment without sovereign guarantees to private and public entities that meet specific eligibility requirements on non-concessional terms.

A statement issued by the development finance institution said non-sovereign operations (NSOs) refers to financing and investment operations that are not guaranteed by a state, covering mostly private sector transactions, adding that they also cover non-sovereign guaranteed financing of eligible public sector enterprises, as well as financing of regional development finance institutions.

It said the approval of the policy comes at a critical moment when the bank was  seeking to accelerate inclusive and sustainable economic growth, and crowd in more private sector funding for strong and inclusive growth  to drive economic transformation and sustainable development in its regional member countries (RMCs).

“The NSO policy will complement the bank’s overarching 2013 Private Sector Development policy framework, notably, by defining what the bank will do in the area of non-sovereign lending. Within this context, the objective of the bank’s non-sovereign operations 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,” it said.

It noted hat this would enable it to contribute to the sustainable economic growth and inclusive social development of its RMCs individually and jointly, in fulfilment of its mandate.

According to the bank, its 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, adding that it will also help scale up financing in the bank’s High 5 priority areas of intervention.

The AfDB said under the NSO policy it would provide financing to non-sovereign operations subject to four conditions, namely: that the borrower is a private enterprise or an eligible public sector enterprise; that the operations are financially sound; that the operations should result in satisfactory development outcomes, including supporting or creating opportunities for private sector development; and that the bank brings additionally, which could be either financial or non-financial.

It added that the policy would ensure that NSOs are well-prepared with clear value added/additionally brought by the Bank; are technically, economically and financially sound, and diligently managed, adhering to high ethical norms; are environmentally and socially sustainable; and that they have solid prospects of generating significant development results in the RMCs in which they are implemented.

It emphasised that policy does not apply to the AfDB’s sovereign loans and sovereign-guaranteed loans, but noted that such operations will continue to be governed by the relevant policies that guide the Bank Group’s public sector operations.