Rwanda’s development bank BRD floats first $25mn sustainability bond

By bne IntelliNews October 2, 2023

The Development Bank of Rwanda (BRD) has floated a sustainability-linked bond in Kigali, looking to raise RWF30bn ($24.8mn) to support the state-owned lender’s environmental, social and governance (ESG) programmes with partner lenders, The East African reports.

The bond, listed at the Rwanda Stock Exchange on Friday (September 29), is expected to close on October 13 and will have a seven-year maturity period. It is the initial issuance as part of a larger plan to raise RFW150bn ($124mn) in the medium term.

Unlike many sustainability-linked bonds globally, which typically offer step-down coupon rates, the BRD bond will offer a step-up coupon rate, meaning that the rate of return (ROI) will increase at least once during its life.

The bond – said to be a first by such a national development bank globally –aims to increase loans by the BRD and its partner financial institutions to women-led businesses and towards financing of affordable housing projects.

BRD chief executive officer Kampeta Sayinzoga said the bond is part of efforts to diversify its source of development finance by tapping into the local capital market.

“This will ensure that BRD is no longer solely reliant on international credit lines thereby sophisticating further its resource mobilisation efforts,” she is quoted by The East African as saying.

Through a World Bank loan, the Rwandan government will do credit enhancement for the bond — a strategy to boost the BRD’s risk profile and minimise the cost of servicing returns — to help mobilise private sector finance.

The World Bank said in a statement that it expects that “with time, BRD will be able to issue without a credit enhancement, given its strong balance sheet and credit rating”.

Sustainability-linked bonds have been an emerging source of finance for green, social and sustainable projects across the globe. According to data by Bloomberg, this type of financing raised more than $500bn in the first half of 2023 alone, up 18.6% y/y.

Credit rating agency Standard and Poor’s estimates that global sustainable bonds issued this year will surpass the $900bn recorded last year, accounting for 14-16% of total bond issuances worldwide.

In the region, fewer than five such bonds have been issued so far. The first sustainable bond in the region was listed at the Nairobi Securities Exchange, issued by real estate developer Acorn Holdings Ltd in 2019, targeting to raise KES5bn ($34mn) with a maturity period of five years at a 12.25% return rate, according to The East African.

Tanzania’s first ever sustainable bond was issued in September by CRDB bank, seeking to raise TZS780bn ($300bn) at a coupon rate of 10.25% for financing of domestic green projects.

Uganda is yet to list any as its bourse still doesn’t have a sustainability bond listing segment.

Keith Hansen, World Bank’s country director for Kenya, Rwanda, Somalia and Uganda, is quoted as saying he is “confident” that Rwanda’s issuance “will act as a template for many other countries in the coming years”.

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