NDB shows further commitment to infrastructure construction
The New Development Bank (NDB) has issued loans for 37 infrastructure projects by September this year, with a total value of 10.2 billion U.S. dollars.
Sustainability is at the core of the bank’s mandate and 80 percent of its loans went to transport, clean energy, water and sanitation sectors, according to K.V. Kamath, the bank’s president.
The bank’s five-year strategy reveals that about two-thirds of all projects will be devoted to sustainable infrastructure development and the commitment to sustainable infrastructure is a standout feature to the NDB.
The bank founded by the five BRICS countries (Brazil, Russia, India, China and South Africa) in 2015 and all of the founding members have equal voting shares. It serves as a source of long-term finance for infrastructure in its member countries with a subscribed capital base of 50 billion U.S. dollars.
Long lead times and complex procedures usually set considerable obstacle for countries applying loans from development finance institutions, whereas all NDB’s loans were being approved within a period of six months. The efficiency allow loans issued to keep pace with the member country’s economic growth.
Projects approved for funding this year by the bank include one to replace natural gas-fueled buses with electric ones in Yinchuan City and another to help reducing the logistics gap through building multi-modal logistics infrastructure in Lanzhou, both in northwest China.
The bank also announced a 180 million dollars loan to South African power company Eskom to fund renewable energy projects and a 300 million dollars loan for a greenhouse gas reduction project in the country.
High quality bonds
The credit quality has been recognized by rating agencies. Standard & Poor and Fitch both awarded the bonds AA+ ratings. The high credit rating enables banks to raise capital relatively cheaply from the bond markets. The lower borrowing cost is to the advantage of the banks, as it enables them to pass on that benefit to borrowers in the form of competitive interest rates for their loans.
Move away from dollar funding
NDB is committed to making local currency funding available to all its member countries, Leslie Maasdorp, vice-president of the bank said in an article in September.
The NDB has successfully registered a couple of local currency bond programs, with 10 billion yuan in China, 10 billion rand in South Africa and is about to complete the registration of a 100 billion ruble program.
“We will raise dollars, we will raise euros, but at the same time there will be a significant reliance on local currencies,” Kamath said. The move would allow the bank to move away from loans denominated in dollars.