Financial Products Treasury Department Financial Services Division

AFRICAN DEVELOPMENT BANK 2 Through these Windows, the Bank Group Addresses the Diverse Needs of African Countries n African Development Bank –Market-based lending terms  African Development Fund –Grants –Concessional loans, up to 50 years maturity including 10-year grace period –Service charge of 0.75% per annum and commitment fee of 0.50 % per annum on undisbursed amount n Nigeria Trust Fund –Semi-concessional loans –USD only, 25 years, 2-4% n Technical Assistance Funds –MIC Trust Fund –EPSA (Japan) –Bi-lateral  Eligible to ADB funding (13 countries)  Eligible to ADF funding (38 countries)  Eligible to ADB and ADF funding (2 countries)

AFRICAN DEVELOPMENT BANK 3 ADB Group ADB Debt Funded ADF Donor funded Sovgn & Sovgn G’teed (15 MICs) Non-Sovgn G’teed Public Sector (15 MICs) Private Sector (All) INTERVENTION INSTRUMENTS Policy based, Sector / Structural adjustment, Project, Sector Wide Approaches, Technical Assistance FINANCIAL PRODUCTS Loans, LOCs, Guarantees, Agency Lines, Equity, Risk Management Products FINANCIAL PRODUCTS Grants, Concessional Loans / LOCs Sovgn G’teed (40) NTF Nigeria funded Sovgn G’teed (All) Project Loans USD, 25 years, 2-4%

AFRICAN DEVELOPMENT BANK 4 Financial Products Classified into Four Main Groups  Loan products  Risk management products  Guarantees  Equity participation or quasi-equity Introduced for Flexibility of RMCs

AFRICAN DEVELOPMENT BANK 5 Loan Products  Selection of currencies US$, €, Yen & ZAR  Selection of interest rate bases Floating n 6-month LIBOR, EURIBOR, JIBAR Fixed n Amortizing swap, computed from market rates n Choices of rate fixing dates –Each disbursement –Bank floating rate reset dates –Final disbursement –Dates decided by borrower Variable n Weighted average cost of funding pool in that currency

AFRICAN DEVELOPMENT BANK 6 Loan Pricing  Pricing Methodology Lending Rate = Base Rate + Lending Spread Fees Sovereign GuaranteedNon-sovereign Guaranteed Lending Spread40 bpRisk based Front-end FeeNone0 - 1% Commitment Fee None0 – 1%, accruing 60 days after loan signature Appraisal FeeNoneCase by case Pre-payment premium Fixed and Variable rate only MaturityUp to 20 years, 5 years graceUp to 15 years, 5 years grace RepaymentGenerally equal Amortization, others permitted

AFRICAN DEVELOPMENT BANK 7 Non-sovereign Guaranteed Loan Pricing  Considerations Credit rating Co-financier pricing Competitive position Maturity

AFRICAN DEVELOPMENT BANK 8 Lending in Local Currencies  Framework recently approved  Rationale Revenues denominated primarily in local currency Eliminate foreign currency risk Contribute to reducing financial sector and overall economic risk exposure (FX and maturity risk for borrowers and financial institutions)  Issues Loans - limited to financing local expenditures (Article 16 restriction) Ability to raise local currency resources n Bond issues n Swaps n Guarantees Risk Management n Asset – liability management n Warehousing & cost of carry

AFRICAN DEVELOPMENT BANK 9 Risk Management Products (RMP)  Reduce client financial risks and enhance the Bank’s own risk profile, financial integrity and intermediation capacity  Respond to customer needs according to their risk profile  Offer instruments that are not normally available To most clients due to credit issues In adequate sizes In long maturities At competitive prices  Bank is intermediary in all these transactions  Market based products  Use reserved for borrowers who have demonstrated a good understanding of these products

AFRICAN DEVELOPMENT BANK 10 Risk Management Products Available  Cap, Floor and Collar Fee: 12.5 basis points on total amount hedged  Interest Rate Swap Fee: 12.5 basis points on total amount hedged  Currency Swap Fee: 25 basis points on total amount hedged  Commodity linked hedge Fee: 37.5 basis points on total amount hedged

AFRICAN DEVELOPMENT BANK 11 Guarantees  Assist borrower to obtain additional financing from banks and capital markets (domestic and international)  Priced similarly to the credit spread on equivalent loans  Help borrower to mobilize resources in local currency  Partial credit guarantee Covers portion of debt against all risks Used to extend/reinforce credit on longer maturities  Partial risk guarantee Protection against selected political risks, e.g. monetary convertibility, currency transfer, regulatory risk, expropriation and non-performance of contractual commitments by government or government agencies  Counter-guarantee requirement For sovereign operations, the Bank may require, as for loans, a counter-guarantee from member country where project is located

AFRICAN DEVELOPMENT BANK 12 A Range of Equity and Quasi-Equity Instruments is also Available  The Bank will not take majority shareholder i.e. controlling interest  The Bank will seek board representation  Need for clear exit strategy  Types of equity participation Direct purchase of equity Indirect, through investment funds (e.g. regional or sector specific)  Quasi equity Redeemable preferred stock Convertible debt e.g debentures

AFRICAN DEVELOPMENT BANK 13 ADF Loans  Maturity up to 50 years;  Grace Period up to 10 years;  Service charge: 0.75% per annum on disbursed and outstanding amount;  Commitment fee: 0.50% per annum on undisbursed amount accruing 120 days after loan signature;  Principal Repayment: 1% of the principal per annum from the 11th to 20th year; 3% of the principal per annum from the 21st to 50th year. ADF Line of Credit  Maturity up to 20 years;  Grace period up to 5 years;  Service charge: 0.75% per annum on disbursed and outstanding amount;  Commitment fee: 0.50% per annum on undisbursed amount accruing 120 days after loan signature. ADF Lending Terms

AFRICAN DEVELOPMENT BANK 14 ADF Currency Choice Borrowers can select disbursement currency n Condition: effective for new loans negotiated after 23 June 2005 n Currencies available: EUR, USD, JPY & GBP (currencies of SDR basket) n Choice: at loan signature n Loan remains denominated in Unit of Account (UA) n Repayment: in currency disbursed

AFRICAN DEVELOPMENT BANK 15 CONTACT LIST  TREASURY DEPARTMENT, TUNIS:  Marie-Laure Akin-Olugbade, Principal Financial Analyst, Officer in Charge, Financial Technical Services Division Tel: (216) 7110  Samuel Mivedor, Principal Financial Analyst (Tel)  ADB OFFICE MAPUTO: Willye Mai King, Country Program Officer