InfraCo Africa, a subsidiary of the Private Infrastructure Creation Group (PIDG), has signed a Joint Development Agreement (JDA) with Cardano Development (CD) for the development of a credit enhancement facility in Kenya, worth up to $1 million.
The investment is done through the company’s specific investment vehicle, which is backed by the Foreign Commonwealth and Development Office of the United Kingdom (FCDO).
The facility will be designed to attract institutional investment in local currency and, if operational, is expected to promote infrastructure development in a variety of sectors.
“InfraCo Africa are excited to bring our expertise and investment capital to the table, working with colleagues at Cardano Development to develop and establish a tailored credit enhancement solution to strengthen Kenya’s capital markets,” said InfraCo Africa CIO, Claire Jarratt.
“Strong local capital markets serve to protect infrastructure projects from external shocks and currency volatility, giving investors’ confidence. That confidence, nurtured by credit enhancement facilities such as the one we are seeking to establish here in Kenya, has the potential to transform the infrastructure sector, driving economic development and unlocking new sources of long-term finance for the future.”
Kenya has a sizable pension, life insurance, and private wealth fund portfolio.
Kenyan infrastructure projects, on the other hand, are heavily reliant on bank loans denominated in US dollars, which rarely give the tenor required for effective infrastructure development and subject borrowers to currency exchange risk.
“Since 2018, Cardano Development has collaborated with PIDG to undertake feasibility assessments for a financially viable, locally based and capitalised credit enhancement facility to promote the participation of long-term capital providers in Kenya’s debt capital markets, specifically around infrastructure,” said Cardano Development CEO, Joost Zuidberg.
“Now, we are delighted to have signed an agreement with InfraCo Africa to bring this credit enhancement facility from concept to reality. The facility will serve to unlock local currency investment from domestic private and institutional investors in support of long-term infrastructure development in the country.”
“We at Cardano Development have a strong track record in establishing similar initiatives, notably InfraZamin Pakistan where we undertook the initial groundwork in 2018–2019. That institution is now ready to issue credit guarantees for infrastructure-related debt, thereby attracting private capital that would otherwise not participate in lending. Based on this success, I believe we can bring our expertise and investment to work diligently with our partners PIDG and InfraCo Africa to structure and develop this potentially catalytic facility for East Africa.”
Through its recent investment in the Acorn REITs, which promote affordable student housing in Nairobi, InfraCo Africa has proved its commitment to Kenya’s capital markets.
InfraCredit Nigeria, a credit enhancement facility formed in 2017 by its sibling PIDG company GuarantCo — a fund administered by Cardano Development — and the Nigerian Sovereign Investment Authority to help Nigeria’s infrastructure industry, has also received funding from the company. The proposed Kenyan facility, InfraCredit Nigeria, has a similar mandate.