Local currency solution for Multilateral Development Bank Portfolio Transfer: Feasibility Study

In June 2023, FSD Africa was awarded funding from the MDB Challenge Fund to develop a project focused on a ‘Local Currency Solution for Multilateral Development Bank (MDB) Portfolio Transfer’ (the project). FSD Africa’s proposed solution aims to empower MDBs and Development Finance Institutions (DFIs) to provide more financing to developing and emerging economies. This is aligned with the recommendations of the G20 Independent Review of MDBs’ Capital Adequacy Framework (CAF) report. The focus area is on promoting financial innovation and development of new instruments to catalyse private investment.

The purpose of this study is to explore the potential for transferring asset portfolios funded by multilateral development banks (MDBs) to domestic institutional investors in Africa through a local currency solution.

The primary aim is to expand the scope of MDBs’ investments by freeing up capital while benefiting local institutional investors and capital market development and reducing the foreign exchange risk of those benefiting from the investments funded by MDBs.

The study focuses on markets in East and West Africa with relatively deep institutional investor bases, including Kenya, Tanzania, Uganda, Ghana, Nigeria, Cote d’Ivoire, and Senegal.