WASHINGTON, D.C. – The City of Dakar announced today its plans to issue the first non-sovereign-backed municipal bond in all of Sub-Saharan Africa outside of South Africa. The $41.8 million bond, backed by a U.S. Agency for International Development (USAID) Development Credit Authority bond guarantee, will raise funds for the construction of a marketplace for more than 3,500 street vendors.
Supported with technical assistance from the Gates Foundation, this historic transaction will enable the city to access, for the first time, more affordable financing from capital markets. In going through the process to offer the bond, the city developed stronger, more transparent and accountable financial management and reporting systems, positioning it to issue additional bonds in the future without continued donor support.
“This partnership underscores how USAID is working with engines of American innovation–like the Gates Foundation–to end extreme poverty. By unlocking the power of private capital, we can help local leaders like Mayor Khalifa Sall seize opportunities for broad-based economic growth,” said USAID Administrator Rajiv Shah.
In addition to launching the municipal bond market in West Africa, this transaction will attract new financing partners to the region, most notably institutional investors, such as pension funds and insurance companies. These private sector investors are critical to closing the growing funding gap between massive unmet infrastructure financing needs across Africa and declining local government budgets.
“With USAID Development Credit Authority’s support, the City of Dakar will be able to diversity the city’s capital resources at a lower rate for a longer maturity from the private sector. The success of this bond will open new opportunities for the City of Dakar”, said Mayor of Dakar Khalifa Sall. Increased financing will lead to the broader extension of city services and upgrades to infrastructure, particularly to the urban poor, who are usually the first to get marginalized when services are cut for lack of proper financing.
USAID’s Development Credit Authority uses partial credit guarantees to mobilize local financing in developing countries. Credit guarantees encourage private lenders to extend financing to underserved borrowers in new sectors and regions. By opening up local channels of financing, USAID is empowering entrepreneurs and municipalities in developing countries at a minimal cost to the U.S. taxpayer. More information: http://www.usaid.gov/dca