Tanzania's CRDB goes global with landmark green bond listing

Zawya

17 hours ago

Tanzania's CRDB Bank has listed its inaugural green bond on the Luxembourg Stock Exchange (LuxSE) on the back of a $65.7 million subscriptions windfall in its first two years of operation.
The Kijani Bond, launched by the bank in September 2023 to pioneer green financing in the country, made its debut on LuxSE's Green Exchange (LGX) platform on July 1 for an initial five-year period, maturing in October 2028.
The coupon rate has been fixed at 10.25 percent interest per annum, payable twice a year, with the deal marking the first foray by a Tanzanian commercial bank into financial markets outside Africa.
CRDB Bank Chief Executive Officer Abdulmajid Nsekela said the Kijani Bond's initial public offer was oversubscribed by 429 percent, paving the way for the latest expansion.'This listing represents more than the culmination of a financial transaction. We are taking our sustainability journey global, not just to raise funds, but to raise the bar,' Mr Nsekela said.
Green bonds are fixed income instruments used by financial institutions to raise sufficient funding for sustainability projects, with environmental benefits, mostly related to climate change mitigation and adaptation, while simultaneously making profits for the investors.
In many countries these bonds come with significant tax benefits, making them a more attractive investment compared to ordinary bonds. Banking industry experts are also increasingly tapping green bonds as a safer protection against market fluctuations, offering higher levels of transparency.
Green bonds have become more popular across Africa since the European Investment Bank introduced them in 2007, and by 2021 banks on the continent had issued $3.96 billion worth of such bonds.
South Africa reportedly houses more than 70 percent of Africa's green bonds, but has been joined by Ghana, Nigeria, Kenya, Morocco and most recently Tanzania in recent years, a development that is expected to spread the market share more equitably in due time.
In Tanzania's case, its economy is highly dependent on sectors affected by climate change, with the United Nations estimating that climate hazards could wipe up to 2 percent off the country's GDP per year by 2030.
The LGX is one of the world's leading sustainable finance platforms, its eligibility requirements for green bond listing covering categories such as clean transportation, green buildings, energy efficiency, sustainable water management, pollution prevention and renewable energy.
The bank said at the 2023 IPO launch that it was looking to raise up to $22 million in the first year (2023/2024) followed by further estimated yields of $37.34 million in 2024/2025, $78.84 million in 2025/2026 and $83 million in 2026/2027 and 2027/2028 respectively.
According to an LGX statement, CRDB's green bond 'has already empowered thousands of women and youth-led businesses, supported climate-smart farming, and improved livelihoods across Tanzania.'Despite Kenya being the first in the region to have a green bond, it has had a drought of new listings since the last one –which was also the first, was listed at the Nairobi Securities Exchange (NSE) in 2019.
The $34 million bond floated by real estate developer Acorn Holdings had a coupon rate of 12.25 percent over a five-year period, and was meant to construct sustainable buildings in Nairobi.
Nairobi-based lender, KCB, had announced plans to float an $88 million green bond, but it has never followed through with the plan.
The Kenyan government has also expressed intentions to float a sovereign green bond to plug fiscal deficit gaps for funding allotted to green assets and projects in the country.
Cabinet approved the Sovereign Green Bond Framework last year, setting in motion the process to issue its first Sovereign green bond.
Additional reporting by Vincent Owino © Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).