IFC, a sister organisation of the World Bank and a member of the World Bank Group, has announced its debut Kgalagadi Bond to finance a $25 million investment in the Botswana Building Society (BBS). IFC’s support to the Building Society will promote financial inclusion and access to housing finance in the country.
IFC investment in the Botswana Building Society comprises a senior loan equivalent to $25 million in local currency. The long-term funding will support the transformation of the Society into a full-service commercial bank financing underserved clients, including small and medium enterprises.
The Kgalagadi Bond, which was over-subscribed, is funding the investment. It is the first local currency bond issued by a non-resident issuer in Botswana and also the first by a AAA rated institution in the country. This is the first amortizing bond in the market, and forms part of the IFC Pan African Domestic Medium Term Note Program.
BBS is a leading domestically owned financial institution and the largest residential mortgage lender in Botswana. The transformation of BBS will ensure that the envisaged commercial bank enhances both its financial inclusion and housing finance initiatives and help it to compete more effectively against larger local commercial banks. The IFC investment will help to strengthen BBS’s financial stability and assist the demutualised Society to introduce new products and services for under-served market segments, including Small and Medium Enterprises.
Pius Molefe, Managing Director of BBS said, “We welcome IFC’s support to our transformation strategy. The financing will enable us to offer conventional banking products at more competitive rates, making us a stronger player in the market.”
IFC supports clients by mobilising private capital to create, deepen and expand markets. Financial inclusion and growing SMEs are a key focus of IFC interventions, job creation and their significant impact in reshaping markets.
Oumar Seydi, IFC Regional Director for Africa said, “IFC financing to Botswana Building Society will improve access to finance for job-creating small and medium enterprises. The bond issuance will mobilise long-term funds in the capital market and channel them to BBS, consistent with our strategy to create markets that promote growth.”
IFC and BBS recognise that home ownership is a key source of wealth creation for low and medium income earners, however, in Sub-Saharan Africa, access to mortgages and other forms of financing for purchasing homes is limited. In Botswana, only two percent of the population has used housing finance, as most households still use non-mortgage credit. IFC is providing long-term funding and eliminating obstacles to the development of an enabling environment for affordable housing by supporting mortgage refinancing companies across the continent.