MIRANDA ABRAHAM: Loan market in sub-Saharan Africa fast out of the blocks

The sub-Saharan African loan market has made a strong start to 2022, after two years of record low volumes during the Covid-19 pandemic. Increased interest from borrowers and investors should ensure the market reverts to a growth cycle this year, with African-based banks continuing to play an ever more important role in its recovery and expansion.

Often syndicated loans are used by countries or companies making their first foray into international capital markets, ahead of an approach to the public debt capital markets. For those borrowers already active in the public debt capital markets, syndicated loans are a way of diversifying their sources of financing and increasing investor reach.

However, potential borrowers could sit it out only for so long before they had to return to the loan market for refinancing. Already 2022 is starting to see many new deals and refinancing as the pandemic recedes and economies recover. This pickup in activity is being met by increased interest from an expanding universe of investors. They are showing much higher levels of interest in lending to sub-Saharan Africa, particularly as other developing markets such as Russia and Central and Eastern Europe falter due to political uncertainties and sanctions.

Another significant development driving liquidity into the market is that the loan and credit insurance markets are becoming more entwined. Since 2008 the number of credit insurance syndicates has more than doubled to about 80. These additional players in the financial insurance market have fuelled the market’s appetite to provide risk mitigation for banks investing in Africa, expanding the pool of liquidity from banks.

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