Launched in 2008, the African Financial Markets Initiative (AFMI) is an expression of commitment by the African Development Bank (AfDB) to contribute to domestic resource mobilization and bond market development on the continent.
There has been a decade of strong improvement in Public Financial Management across the continent which now calls for leveraging new ways of raising resources within the domestic financial system. This therefore, entails strengthening of the role of domestic bond markets to support governments’ efforts in financing their economies.
The need to have a robust Sovereign bond market is paramount as it forms the backbone of any fixed income market. The African bond markets lack the necessary institutional and operational infrastructure, which in turn leads to low levels of liquidity, a narrow investor base, short maturities and higher borrowing costs. The underdevelopment of sovereign bond markets on the continent impedes competitiveness, breadth of credit and hedging products available as well as the development of corporate bond markets.
However, as the continent’s economic growth continues, both foreign and local investors will increasingly seek exposure to African domestic bond markets. It is for these reasons that the African Development Bank created the AFMI. Developed in Africa for Africa and focused on a cooperative approach with public and private sector partners, the AFMI will provide innovative and tailored solutions to further develop domestic bond markets on the continent.
The African Domestic Bond Fund is the world’s first multi-jurisdictional fixed income Exchange Traded Fund (ETF) on the African continent.