Japanese megabank Mitsubishi UFJ Financial Group will extend US$520M in government-backed loans to assist African nations in combating the COVID-19 epidemic.
The government’s Nippon Export and Investment Insurance will guarantee 90% of the loans, which will be distributed to eight countries, including Egypt, Ghana and South Africa. The money will be used to purchase medicine, medical equipment and food.
MUFG will contribute part of the funds, and the rest has been divided and sold to 19 institutional investors, including life insurance companies and regional banks. Those seeking higher returns purchased portions not guaranteed by the government.
“We brought in various investors by putting together financing that satisfies either demand,” a MUFG manager said. Banks and brokerages affiliated with MUFG recruited investors.
The African Export-Import Bank will serve as the borrower, which will distribute the funds to governments as well as state-backed lenders. The financing period will last 10 years. The countries receiving the money have strong relations with Japan tied to power generation and liquefied natural gas development.
This marks NEXI’s first project since Japan decided to guarantee loans to foreign governments and companies to advance economic cooperation.
Japanese megabanks have increased their activity across Africa in recent years. During last year’s Tokyo International Conference on African Development, roughly 10 memoranda of understanding were signed with African financial groups. The deals deepened partnerships in trade financing, as well as in investments and lending.
MUFG previously put together loans for Benin that were guaranteed in part by the African Trade Insurance Agency. The bank’s record with foreign institutions led to NEXI’s backing in this latest round of financing.
This public-private undertaking supports the sustainable development goals of the United Nations. The pandemic has underscored the need for multilateral cooperation, especially in emerging and developing countries. NEXI will look for opportunities to support financing in countries outside of Africa as well.
The projects represents a business opportunity for Japanese banks as well as for investors operating in a low-yield financial market for years.
Source: Nikkei Asia