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  • Signing of Japanese ODA Loan with the African Development Bank Group: Providing financing for the private sector to support economic growth

Press Releases

June 19, 2017

Signing of Japanese ODA Loan with the African Development Bank Group: Providing financing for the private sector to support economic growth

photoPhoto: AfDB

On June 15, the Japan International Cooperation Agency (JICA) signed a loan agreement with the African Development Bank Group (AfDB) to provide a Japanese ODA loan of up to 34.41 billion yen for the Seventh Private Sector Assistance Loan under the Joint Initiative titled EPSA for Africa.

This is the seventh Japanese ODA loan to the AfDB’s Private Sector Financing Operations and is a part of the Enhanced Private Sector Assistance (EPSA) for Africa [1, 2] announced by the Government of Japan in 2012. With the objectives of promoting economic growth and the private sector taking the lead to reduce poverty in Africa, JICA will provide loans for infrastructure, agriculture and other undertakings needed by private enterprises in AfDB member countries through the AfDB’s Private Sector Financing Operations.

The average annual economic growth rate of African countries is projected to be 2.2 percent in 2016 and 3.4 percent in 2017, with sustainable economic growth expected going forward. The problem of unemployment, however, particularly among the younger demographic, grows more serious each year, and stimulating the private sector—which is where employment must be created—is a priority. However, due to financial limitations, the public sector cannot secure the budget required for the infrastructure and other improvements necessary for private sector development, and micro, small and medium enterprises (MSMEs) experience difficulties in accessing financing from financial institutions as the financial markets in Africa are not generally mature.

Given these circumstances, in June 2013, the Fifth Tokyo International Conference on African Development (TICAD V) adopted the Yokohama Action Plan (2013–2017) [3] in which it was agreed to promote trade and investment in the priority fields of infrastructure and agriculture, promote active participation by the private sector, and strengthen the driving forces of growth. At the Sixth Tokyo International Conference on African Development (TICAD VI) in August 2016, “promoting structural economic transformation through economic diversification and industrialization” was stipulated as one of the three pillars of the Nairobi Declaration (2016–2018) [4].

JICA has provided six rounds of financing for this initiative since 2007 [5], and this seventh round will continue supporting the burgeoning financial needs of the private sector. The previous six rounds have provided support including financing to MSMEs through local banks and an expansion project for a gas thermal power station. Financing and other support has also been provided through sub-regional development financial institutions for fostering export-led industries and industries with local characteristics, and a high level of success has been achieved in industrial development as well as in the creation of employment. This round is aimed at advancing regional integration and further supporting the growth of the private sector, which grows the economy, through infrastructure and other projects in African countries.

[1] The EPSA is a program implemented through financing and technical support, and JICA is in charge of the financing portion. There are two financing methods used: 1) Accelerated Cofinancing Facility for Africa (ACFA) with AfDB funds for governments, government agencies and others, and 2) private sector assistance financing (this initiative) under the EPSA.

[2] During the Gleneagles G8 Summit in 2005, the Government of Japan launched the EPSA with the AfDB and announced a total of one billion dollars in Japanese ODA loan over a five-year period. At the 2012 G20 Los Cabos Summit, stimulating private investment in Africa was discussed as an on-going pressing challenge, and Japan announced an additional one billion dollars in ODA loans over five years under EPSA2. In January 2014, Japanese Prime Minister Shinzo Abe announced that the equivalent in ODA loans would be doubled from one to two billion dollars over the same five-year period. At TICAD VI held in Kenya in August 2016, it was announced that Japan and the AfDB would together provide three billion dollars over three years as EPSA3.

[4] TICAD VI Nairobi Declaration


1. Terms and Amount of Loan

Project title Amount (million yen) Annual interest rate (%) Repayment
period
(years)
Grace
period
(years)
Procurement
Project Consulting services
Seventh Private Sector Assistance Loan under the Joint Initiative titled EPSA for Africa 34,410 0.35% N/A 40 10 General, untied

2. Executing Agency
Co-financing, Syndication & Client Services Department, The African Development Bank
Address: Avenue Joseph Anoma, 01 BP 1387, Abidjan 01, Côte d’Ivoire
Phone: +225-2026-2743

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