The AfDB Issues Highest Rated Hybrid Capital by a Multilateral Development Bank

The African Development Bank Group’s inaugural hybrid capital issuance has garnered global recognition, establishing the Bank as a pioneer in innovative sustainable financing.
The S&P Global Ratings gave the inaugural transaction an AA rating, the highest rating for hybrid capital. This would be the first-ever issuance by a multilateral development bank.

Hybrid capital will have a multiplier effect on the Bank’s financing and permit the issuance of additional green, social, and sustainable bonds to finance projects addressing some of the continent’s most pressing development issues, such as food security, access to water and health services, and climate change.
According to Dr. Akinwumi Adesina, President of the African Development Bank Group, global and regional multilateral development banks are being urged to modify their business models in order to leverage more financing at scale, combat climate change, and speed up development. “The African Development Bank is a financial innovation pioneer. Our decision to issue hybrid capital will enable us to leverage more capital market financing to further accelerate Africa’s growth and development,” Adesina explained.

According to S&P, “as far as we’re aware, the African Development Bank would be the first MLI (Multilateral Lending Institution) to incorporate hybrid capital into its capital structure.” The Bank’s hybrid capital initiative has attracted global attention, including that of the G20 Capital Adequacy Experts group, which has suggested that other multilateral development banks investigate hybrid capital instruments.

Hybrid capital is a combination of debt and equity that supplements rather than supplants these two types of financing. It is a well-established financing instrument extensively utilised by corporations, financial institutions, insurance companies, and government agencies, but has not yet been adopted by multilateral development banks.

This is yet another method for bolstering the capital base of an MDB and optimising its balance sheet. Hassatou N’Sele, the Bank’s Vice President for Finance and Chief Financial Officer, stated that the African Development Bank is introducing a new asset class, hybrid capital, issued by AAA-rated multilateral development banks.

Adesina expressed his delight at the African Development Bank’s historic achievement. “We will continue to respond and lead with financial innovations in response to the global calls for reforms of the global financial architecture,” the head of the bank said.