23rd February 2023
Kenya: Dhamana Guarantee Company
Catalysing domestic capital market development in East Africa
Challenge
Kenya’s capital markets are recognised as among East Africa’s more sophisticated, and the country holds significant wealth in pension, life insurance and private wealth funds. However, Kenyan infrastructure projects are largely reliant on US dollar denominated bank loans to finance their development, loans which seldom offer the length of tenor required for successful infrastructure developments and which expose borrowers to currency exchange risk.
Solution
Strengthening local capital markets will be key to building the necessary investor confidence to ensure that vital infrastructure projects have access to domestic institutional finance. Dhamana Guarantee Company will connect significant untapped pools of domestic institutional capital in East Africa with the real economy, such as new green infrastructure and providers of credit to individuals and businesses. This increases access and the affordability of local capital, providing new low-risk opportunities for local investors. It will also serve to provide a portfolio of businesses with access to the local currency capital needed to deliver bankable projects, meeting the high demand for financial inclusion, new affordable housing, transportation, water and energy infrastructure and promoting long term economic development.
In Kenya, PIDG and Cardano Development collaborated to undertake feasibility studies for a credit enhancement facility to promote participation of long-term capital providers in the country’s debt capital markets. The studies noted the potential catalytic effect such an institution might have on mobilising support for Kenya’s infrastructure sector and InfraCo Africa partnered with Cardano Development to establish Dhamana Guarantee Company Ltd, a highly rated credit guarantee company in Kenya.
Being jointly developed by InfraCo Africa and Cardano Development with support from FSD Africa.
