S&P Global Ratings (S&P) has today assigned a ‘AA’ foreign currency long-term issuer credit rating to the Arab Bank for Economic Development in Africa (BADEA), with a ‘Stable’ outlook.
This extremely high rating follows the ‘Aa2’ rating with Positive Outlook assigned by Moody’s earlier this year and confirms the extraordinary credit profile of the bank for all stakeholders. The Bank’s core role is to strengthen economic, financial, and technical cooperation between Arab and Sub-Saharan African (SSA) countries and is the embodiment of Arab-African solidarity on foundations of equality and friendship.
Since operations began in 1975, the Bank has financed 730 public sector projects, approved 83 private sector and trade finance operations, and provided more than 890 technical assistance and capacity development grants across 44 Sub Saharan African (‘SSA’) countries that often struggle to attract competitive private sector funding.
The bank has an unusually strong governance structure whereby it can only lend to non-shareholder countries and as such BADEA serves as a trusted coordinator and highly effective catalyst for Arab development funds as well as other MLIs which magnifies the bank’s overall impact in terms of lending into Africa, and is key for the shared prosperity of both regions.
BADEA’s non performing loan ratio currently stands at 0.7% despite significant exposure to low-rated SSA sovereigns and has demonstrated zero-loss performance observed over the entirety of its 48-year history, often driven by preferential treatment and deep-rooted relationships with governments in the region.
BADEA’s financial risk profile is ‘Extremely Strong’, driven by one of the highest Risk Adjusted Capital ratios (86.1% after adjustments) among all S&P rated MLIs. The bank also maintains a strong and highly liquid investment portfolio supporting liquidity ratios that are also above those of similarly rated peers.
S&P also noted that BADEA’s Governance standards are strong, given well-established governance practices, which ensures stability in shareholding as well as in BADEA’s operations. They note that the bank has a strong relationship with its Arab League shareholders who view BADEA as a critical institution in developing knowledge in SSA developmental finance and as a vehicle to further improve Arab-Africa relations. Shareholders have shown support in recent years and increased BADEA’s capital base in April 2022.
“Today marks another key milestone for BADEA in the expansion of our development activities in Africa that we are accelerating in line with the needs of the continent” said Dr. Fahad Abdullah Aldossari, Board Chairman, commenting on S&P rating announcement.
“The potential of Sub-Saharan Africa remains vast and key to the Arab world. With two very strong international ratings, the Bank’s ambition is to leverage our credit profile to catalyze our sovereign partners and better serve the financing needs in this region. This AA rating from S&P confirms our strength to the market and puts the bank in a very strong position to raise funds at highly competitive rates for the benefit of our borrowers in alternative currencies that are used on the continent.” he added.