Rwanda Bank Launches Green Bond for Inclusive Growth

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by KnowESG
KnowESG_Rwanda Bank Launches Green Bond for Inclusive Growth
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The Development Bank of Rwanda (BRD) has unveiled its inaugural Sustainability-Linked Bond (SLB) on the Rwanda Stock Exchange, marking a significant step in promoting environmental, social, and governance (ESG) principles for its partner financial institutions.

This groundbreaking bond issuance also aims to boost funding for women-led businesses and affordable housing initiatives while aligning seamlessly with Rwanda's sustainable economic development goals.

This SLB, partially backed by a World Bank lending operation under the Access to Finance for Economic Recovery and Resilience Project (AFIRR), carries a seven-year maturity and targets 30 billion RWF (approximately $24.8 million). The offer period, set to conclude on October 13, 2023, represents the initial issuance within a $124 million (150 billion RWF) Medium Term Note ("MTN") Programme.

Dr. Uzziel Ndagijimana, Minister of Finance and Economic Planning for Rwanda, expressed the government's appreciation for the World Bank's innovative financing approach, which leverages International Development Association (IDA) funding to attract private capital. This landmark initiative solidifies Rwanda's role as a proof of concept for this pioneering endeavour, with the government eager to expand its collaboration with the World Bank to attract more private capital.

Remarkably, this SLB issuance, approved by the Capital Market Authority, stands as the first ever by a national development bank globally and in East Africa. Diverging from the conventional step-up coupon structure seen in many SLBs worldwide, this SLB introduces an innovative step-down coupon, incentivising the borrower to set and achieve meaningful targets.

Kampeta Sayinzonga, CEO of BRD, emphasised how this bond issuance diversifies the source of development finance for BRD by tapping into the local capital market for the first time. This strategic move reduces the bank's reliance on international credit lines, expanding its resource mobilisation efforts.

BRD's partnership with the World Bank and the Ministry of Finance and Economic Planning showcases a commitment to innovative yet transformative blended finance instruments in pursuit of Sustainability Development Goals (SDGs) investments.

The SLB effectively intertwines funding with sustainability strategies, providing diversification in funding sources while reinforcing BRD's commitment to achieving key performance indicators (KPIs) in alignment with Rwanda's sustainable economic development objectives, as outlined in Rwanda's Vision 2050.

These KPIs revolve around enhancing ESG systems and practices within partner financial institutions, supporting women-led businesses, and facilitating affordable housing initiatives. This issuance also bolsters Rwanda's standing in the region as a leader in sustainable finance and contributes to its capital market development agenda.

Keith Hansen, World Bank Country Director for Kenya, Rwanda, Somalia, and Uganda, underscored the importance of efficient use of public resources in bridging global climate funding gaps. He expressed confidence that this issuance will serve as a model for other countries in the years to come, applauding the Government of Rwanda and BRD for their innovative approach and commitment to realising this transaction.

A noteworthy aspect of this SLB issuance is the credit enhancement facilitated by the Government of Rwanda through a World Bank loan. As BRD gains experience and strengthens its financial position, it is anticipated that future issuances may not require such credit enhancement, further affirming its robust balance sheet and credit rating.

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Source: World Bank

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