Absa Unveil Financial Package To Expand Sustainable Capital Markets

Absa Unveil Financial Package To Expand Sustainable Capital Markets. The African Development Bank and Absa Group, one ofAfrica’s leading financial services providers, today celebrated a landmark agreement to mark theexecution of a transformative financial package aimed at increasing funding for underservedsegments, across South Africa and the continent. The target audience includes women-ownedbusinesses, youth entrepreneurs, and small and medium-sized enterprises (SMEs).

In addition to enhancing Absa’s regulatory capital, the facility will promote access to finance,deepen domestic capital markets, and ensure continued access to global supply chains for issuingbanks in regional member countries, including low-income and fragile states.

The financial package includes:

• A subordinated sustainability-linked (Tier 2) loan amounting to R1.7 billion, complemented by a non-financial support package of R18 million for capacity buildingand technical assistance targeted at SMEs, youth, and women-owned enterprises.
• Subscription of R1 billion into Absa’s inaugural social (Tier 2) bond issuance, withproceeds earmarked for providing affordable housing loans to female homeowners.
• A trade finance Risk Participation Agreement (RPA) facility valued at $150 million, designed to underwrite the risks of trade transactions originated by African issuing banks, reinforcing Absa’s role as a regional bank.

Several components of the package have already been executed, including the successful issuance of Absa’s first Tier 2 social bond on the Johannesburg Stock Exchange in July 2024. The R1 billion proceeds from this bond will be allocated towards affordable housing loans specifically targeting women, empowering them as first-time homeowners in low-incomesegments.

Leila Mokaddem, Director General of the African Development Bank’s Southern Africa Region, stated: “This partnership with Absa Group underscores our commitment to driving sustainableand inclusive economic growth across Africa. Through this financial package, we are not only fortifying Absa’s capital base but also ensuring that essential funding reaches women, youth, andentrepreneurs, fostering a more equitable and prosperous continent. This collaboration aligns seamlessly with our strategic priorities of supporting Africa’s industrialization and enhancing thequality of life for its people. “

Absa has secured a R1.7 billion sustainability-linked Tier 2 loan aimed at general corporate business purposes while incentivizing the extension of finance products to women-owned SMEs as a key performance indicator. As part of this agreement, Absa is collaborating with the African Development Bank to enhance skills among both Absa staff and women business owners. A capacity-building training program has been launched to address the unique challenges faced by female and youth entrepreneurs, by providing mentorship and financial solutions.

Charles Russon, Absa Group interim CEO designate remarked: “The finalisation of this packageconcludes a three-year process that significantly enhances our capacity to fund social initiatives aligned with our commitment to being a force for good. This partnership enables us to increase funding for women and youth in South Africa while facilitating greater trade opportunities across the continent.”

“This partnership aligns with the African Development Bank’s strategic objectives of advancing green, social, and sustainability instruments in the domestic capital markets, supporting African capital market development and regional financial integration,” said Ahmed Attout, Director of the Financial Sector Development Department at the African Development Bank. He emphasised that it is designed to empower Absa to effectively disburse funds for highly impactful social and sustainable economic development initiatives.

The $150 million trade finance facility will drive trade support across Africa, addressing the continent’s annual trade finance gap of over $100 billion. This initiative will enhance access to financing for key sectors such as agriculture, transport, and manufacturing, while fostering financial sector development and regional integration.