The Development Bank of Rwanda (BRD) launched its inaugural Sustainability-Linked Bond (SLB) on the Rwanda Stock Exchange. The SLB supports BRD’s commitment to mainstreaming environmental,social, and governance (ESG) for partner financial institutions, increasing women-led business loans, and financing affordable housing. The bond aligns with Rwanda’s sustainable economic development objectives.
The SLB, partially credit-enhanced via a World Bank lending operation to the Government of Rwanda through the Access to Finance for Economic Recovery and Resilience Project (AFIRR), has a seven-year maturity and is targeting 30 billion RWF ($ 24.8 million). This offer, which will close on October 13, 2023, is the initial issuance as part of a $124 million (150 billion RWF) Medium Term Note (“MTN”) Programme.
“The Government of Rwanda welcomes the support of the World Bank through this innovative financing instrument. It is the first time International Deverlopment Association (IDA) financing is being used to leverage private capital and we are glad World Bank chose Rwanda to be the proof of concept for this initiative,” said Dr. Uzziel Ndagijimana, Minister of Finance and Economic Planning for Rwanda. “The government looks forward to continuing and expanding the existing relationship with the World Bank to crowd in private capital.”
Following the approval from the Capital Market Authority, this SLB issuance is both the first by a national development bank globally and in East Africa. Moreover, in contrast to many SLBs already issued globally,which have a step-up coupon, this SLB has an innovative step-down coupon (lower coupon). Such a structure focuses on incentivizing the borrower to set meaningful targets.
“By issuing its first bond ever, BRD is effectively diversifying its source of development finance by tapping into the local capital market for the first time. This will ensure that BRD is no longer solely reliant on international credit lines thereby expanding its resource mobilization efforts,” said Kampeta Sayinzonga, CEO of BRD. “By partnering with the World Bank and the Ministry of Finance and Economic Planning, BRD also leads the way in leveraging innovative yet transformative blended finance instruments for Sustainability Development Goals (SDGs) investments.”
The SLB effectively links funding and sustainability strategies and helps to diversify funding sources while nurturing BRD’s commitments to achieving key performance indicators (KPIs) aligned with Rwanda’s sustainable economic development objectives captured in Rwanda’s Vision 2050. These KPIs focus on improving ESG systems and practices in partner financial institutions,financing to women-led businesses, and affordable housing. The issuance contributes to Rwanda’s capital market development agenda and places the country as a leader in sustainable finance regionally.
“Given the climate funding gaps globally, using the scarce public resources as efficiently as possible is paramount,” said Keith Hansen, World Bank Country Director for Kneya, Rwanda, Somalia and Uganda. “I am confident that this issuance will act as a template for many other countries in the coming years and I commend the Government of Rwanda and BRD for their innovation and openness to bring this transaction to fruition.”
A vital feature of the SLB issuance is the credit enhancement, which the Government of Rwanda funded through a World Bank loan. As this is BRD’s first issuance, the credit-enhanced structure has helped to mobilize private sector capital, enabling BRD to diversify its funding base. It is expected that with time, BRD will be able to issue without a credit enhancement, given its strong balance sheet and credit rating.
