The African Export-Import Bank (Afreximbank) has successfully raised $299.90 million (2.2 billion renminbi) through its inaugural issuance of a Chinese Panda bond, marking a significant milestone in the institution’s efforts to diversify funding sources.
This Panda bond, which carries an interest rate of 2.99%, represents the first issuance by an African multilateral financial institution and the second by any African entity, following Egypt’s 2022 Panda bond offering.
The issuance was led by Bank of China Limited, which served as the lead underwriter and bookrunner, while Exim Bank of China and Industrial and Commercial Bank of China (ICBC) acted as joint lead underwriters.
Access to diversified funding mechanisms
In its statement on Tuesday, Afreximbank emphasized that this achievement aligns with its broader objective to broaden access to diversified funding mechanisms.
“The issuance followed Afreximbank’s successful navigation of the rigorous regulatory and approval processes for Panda bond issuance,” the lender stated.
This development paves the way for other African entities seeking innovative avenues for fundraising in China’s domestic capital markets.
The issuance by Afreximbank follows its successful navigation of China’s rigorous regulatory and approval processes, demonstrating the lender’s financial sophistication and ability to access new pools of capital.
China’s market opens to African issuers
The Chinese government has pledged to open its domestic debt markets to African entities through the use of Panda bonds.
- This initiative emphasized China’s commitment to fostering stronger economic ties with the African continent.
- However, significant challenges remain for issuers, including the complexities of operating in a market where the renminbi is not globally freely traded.
- Despite these hurdles, Afreximbank’s successful issuance sets a precedent for other African institutions, signaling the vast untapped potential for raising funds in Chinese financial markets.
Chandi Mwenebungu, Afreximbank’s Head of Treasury and Markets Division, commented, “This issuance highlights Afreximbank’s commitment to diversifying its funding sources and to tapping into new pools of capital.”
The issuance comes at a time when African economies are navigating shifting macroeconomic landscapes.
What you should know
Panda bonds were first introduced in 2005, with the Asian Development Bank and the International Finance Corporation (a private investment arm of the World Bank) pioneering the market.
- The popularity of Panda bonds has surged in recent years, with issuance hitting a record high of 195 billion yuan in 2024, according to calculations by Deutsche Bank.
- Afreximbank’s entry into this niche market reflects its ambition to leverage emerging opportunities to support African development, while also charting a new course for regional entities in accessing global financial markets.
