The International Finance Corporation (IFC) and Standard Chartered have unveiled a new African bond programme, which should improve access to local-currency financing while lowering the risk for domestic and foreign investors, as well as African borrowers.

It is anticipated that the primary beneficiary sectors will be infrastructure and agriculture. But the programme should also improve access to finance to African microfinance institutions and small businesses.

The IFC Pan-African Debt Medium-Term Note Programme will initially focus on six countries, namely Botswana, Ghana, Kenya, South Africa, Uganda and Zambia. But IFC VP and treasurer Jingdong Hua says efforts will be made to “quickly” extend the programme to other countries as the capital market infrastructure is developed across the continent.

“These are the six markets where we either have already done some work . . . or countries that we think have infrastructure that will facilitate faster regulatory approvals and earlier issuances,” Hua explains.

IFC and Standard Chartered expect to secure the necessary national regulatory approvals over the coming six months and to complete the first transaction within a year. Standard Chartered has been appointed sole arranger and lead manager for the inaugural bond transactions, but other institutions will be able to co-lead individual bond issues.

The engagement will begin at the level of Finance Minister and central bank governor ahead of applications to the various regulatory authorities that will need to sanction the bond programme.

Hua indicates that the IFC has already received regulatory approval for a separate $1-billion domestic bond programme, which it intends folding into the new Pan-African scheme. It has also received sovereign approval in Zambia.

The issuance of local-currency bonds is expected to initiate a “virtuous cycle”, whereby local pension funds will be able to invest in an instrument that enables local savings to be used to either financing key infrastructure, or to support growth and job-supporting enterprise development.

“So it’s really about recycling local savings for developmental purposes,” Hua explains. The programme should also attract foreign investors that are enthused by the “African development story”, but are still wary about the credit environment on the continent.

All IFC bonds have an AAA investment grade rating, which lowers the risk for foreign investors taking up the bonds, which, in turn, will eliminate foreign-exchange risk for the local recipients of the debt.

The bonds will also add resources for the IFC’s pipeline of projects in sub-Saharan Africa and will be additional to the support the World Bank affiliate already delivers off its own balance sheet. In 2011, it invested $2.2-billion to support private sector development in the region.

Standard Chartered’s global development organisations head Vibhuti Sharma says the programme is not only open to support IFC’s projects pipeline in Africa, but also the bank’s own pipeline.

The size and tenor of each bond will be aligned to client and investor demand.