Capital Markets Development Trust Fund: AfDB’s vehicle to boost capital markets development in Africa

  • Posted on: 17 June 2021
  • Updated on: 17 June 2021
  • By: radmin

by Ahmed ATTOUT, Manager, Capital Markets Development Division

Domestic capital markets are critical to improve domestic resource mobilization, to finance the AfDB’s Ten Years Strategy and its High-5’s agenda and more broadly, to positively impact the economies of our Regional Member Countries. We are saving no efforts in implementing this ambitious agenda. As demonstrated during period of external shocks (such as COVID and financial crisis), domestic capital markets provide a resilience tool for economies. It is also through Capital Markets, that both sovereigns and private sector entities can benefit from the untapped growing pool of domestic institutional capital, and access to long term local currency funding.

In delivering our strategic objectives, the African Development Bank in 2019 launched the Capital Markets Development Trust Fund (CMDTF) to support the development of robust African capital markets. The CMDTF is the first multi-donor Trust Fund in the history of the Bank, exclusively focused on capital markets development, with initial generous funding from the Governments of Luxembourg and the Netherlands. It is complementing the AfDB ongoing endeavours toward the deepening and widening of African financial markets.

We designed the CMDTF in close consultation with our partners from the Governments of Luxembourg and the Netherlands. The design was also informed by the lessons we learned from our previous capital markets interventions in Africa. Precisely, CMDTF deploys funding in form of technical assistance and with a focus on four key areas that are crucial to address the market challenges namely; (i) improving capital markets regulatory and legal environment; (ii) enhancing markets infrastructure; (iii) diversifying capital markets offering; and (iv) broadening the investor base. Eligible stakeholders include but are not limited to stock exchanges, national and regional regulators, central banks and ministries of finance.

To ensure impact, development impact and additionality, CMDTF during the first years of operations is focusing on West Africa region with an impactful portfolio of approved interventions that could be summarized as follows:

  1. support the Agence UMOA-Titres to develop a strategic roadmap for debt markets development in the West African Monetary Union (WAMU) and boost secondary markets liquidity by shifting from manual to electronic trading of debt securities.
  2. support transition from compliance based to risk-based supervision approach for the securities market which is expected to boost investor confidence in investing in debt markets in Ghana with the Securities and Exchange Commission (SEC) in Ghana.
  3. build capacity on green bonds and overall risk-based supervision framework for the entire securities markets (SEC Nigeria, stock exchanges, investors and issuers).
  4. undertake a study to identify key competitive variables driving or hindering the success of selected African capital market ecosystems, especially competitive factors that influence issuers and investors’ decisions when selecting a market platform to raise capital or access investment products.; and
  5. support phased integration of securities exchanges in the West African region while promoting cross-border trading and settlement of diverse capital market securities.

Our target is, and will continue to be, focused on structuring impactful interventions, and scaling up the fund by expanding its donors base, scope of the focus areas as well as the geographical coverage.

I invite interested donors or eligible institutions for funding are invited to visit the link below to get more information on the CMDTF and upload request for funds form in English or in French:

https://www.afdb.org/en/topics-and-sectors/initiatives-partnerships/capital-markets-development-trust-fund-cmdtf

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