NBC sells portion of Twiga bond’s to ALCB Fund

DAR ES SALAAM: NATIONAL Bank of Commerce (NBC) has sold its portion of the Twiga Bond’s second tranche through a private placement to the African Local Currency Bond Fund (ALCB Fund).

The bank announced in a statement on Tuesday that the five-year bond, valued at 27.2bn/-, Series 1 of the second tranche, was purchased by the ALCB Fund at an interest rate of 10.7 per cent.

The bank, one of the top ten in the country, marks a significant initiative aimed at strengthening small and medium-sized enterprises (SMEs) across Tanzania.

The statement further said the fund raised will be channelled to support micro, small and medium enterprises (MSMEs).

“The funds raised through the bond will be directed towards providing essential financing to MSMEs, which are recognised as the cornerstone of the country’s economy,” said Theobald Sabi, Managing Director of NBC, in the statement.

Th NBC head said that by enhancing access to necessary funding, the bank is poised to unlock significant growth potential for the enterprises, thereby stimulating overall economic progression in the country.

“Interest payments will be made semi-annually over the bond’s duration, concluding in October 2029.

ALSO READ: NBC Bank launches 27.2bn/- bond to support Tanzania’s SME sector

“The earnings from this bond are exempt from withholding tax deductions, enhancing its appeal to both local and international investors,’’ he said.

Private placement of bonds involves selling them directly to a select group of investors, rather than offering them to the general public through a public offering.

This type of sale is typically done with institutional investors, such as mutual funds, pension funds, insurance companies, or other large investors, rather than retail investors.

Addressing the bond’s potential impact, Mr Sabi expressed enthusiasm for its role in bolstering the SME sector.

“This five-year bond will not only strengthen the SME sector—which employs the majority of the country’s population—but will also expand access to finance and unlock new growth opportunities,” he pointed out.

The ALCB Fund, a pan-African initiative focused on investing in local-currency corporate bonds, made a substantial investment in a privately placed senior unsecured bond, signifying their confidence in NBC’s financial strategy and the viability of local currency financial instruments.

Further enhancing the prospects of this initiative, the ALCB Fund’s investment is supported by a grant from the Currency Exchange Fund (TCX), made available through its EU market creation pricing facility.

This facility aims to encourage the use of local currency in development finance, which is pivotal for promoting economic stability and growth within the country.

The NBC Twiga bond is set to catalyse transformative growth, benefiting both entrepreneurs and the broader economy, and establishing a bright future for the country’ financial ecosystem.

ALSO READ: NBC Bank launches offer price reductions for the holiday season campaign 

“As we move forward with this initiative, it remains steadfast in our mission to empower the backbone of Tanzania’s economy, ensuring that SMEs have the support they need to thrive and contribute to the national development agenda,’’ the statement said.

The Twiga Bond, a Medium Term Note of 300bn/- was opened in the primary market in October 2022, with the first tranche of 30bn/- was oversubscribed by 30 per cent to the tune of 38.9bn/-.