Absa said on Tuesday that it had reached a $497m (R7bn) agreement with the Multilateral Investment Guarantee Agency (Miga) to bolster its financing in seven African countries, and protect it from the potential non-return of money it places with foreign central banks.
The guarantees from Miga, a World Bank organisation with a mandate that includes promoting investment by providing guarantees against political risk, will be valid for as long as 15 years and will help protect the SA lender against risks related to the mandatory capital reserves banks are required to hold with central banks.
Absa said it was the first African banking group to enter into such an agreement with Miga.
“Miga guarantees Absa Group for the money our subsidiaries are required to place on deposit with the central bank in each country, essentially insuring us against losses if the money is not returned,” Absa group treasurer Deon Raju said. This means that Absa “is required to hold less capital which can be redeployed to invest into growth assets”, says Raju.
The guarantees apply to subsidiaries in Ghana, Kenya, Mauritius, Mozambique, Seychelles, Uganda and Zambia.
The subsidiaries will increase sustainable financing for companies and small and medium businesses, as well as projects that benefit the climate, Absa said.
For Miga, the arrangement “encourages the development of banking and credit markets in developing countries and broadens financial inclusion and sustainable financing on the continent”, Absa said.