African Domestic Bond Fund

The African Development Bank seeks to contribute to the development of sound domestic debt markets in Africa through the creation of the African Domestic Bond Fund (ADBF). As the continent’s premier Development Bank, the AfDB is in a privileged position to lead, coordinate and drive the necessary inter-institutional effort needed for this initiative to be successful.

The ADBF will be invested in African local currency denominated sovereign bonds. The specific objectives of the fund are the following:

  • Reduce African countries dependency on foreign currency denominated debt
  • Encourage the deepening of domestic bond markets through investments in longer dated debt
  • Contribute to enlarge the investor base in African domestic bond markets

A full diagnostic feasibility study was completed in 2011. The study provides a quantitative classification of African domestic bond markets by level of development using an objective, transparent and defensible criteria. The study ranks countries based on their aggregate score under the following criteria:

  • Macroeconomic environment (monetary and fiscal policy);
  • Legal and regulatory framework;
  • Bond market infrastructure;
  • Issuers and issuing strategy;
  • Investor base; and
  • Active participation of economic agents.

The final aggregate scores categorize countries by the level of bond market development as follows:

  • Highly developed with global significance: overall score above 80 points (no African country falls into this category)
  • Advanced: overall score of greater than 50 but less than 80 
  • Developing: overall score of greater than 40 but less than 50
  • Nascent: overall score of less than 40 (81% of African countries fall in this category).

As a project, the African Domestic Bond Fund has three components: