(Ecofin Agency) – The JCR welcomes the support of the shareholders of the Arab-African bank, its prudent management and its financial solidity. According to the Japanese rating agency, it maintains a certain stability, despite regional risks, with robust capital and high liquidity.
The Japan Credit Rating Agency (JCR) reaffirmed, on Wednesday, November 13, the “AAA” credit rating of the Arab Bank for Economic Development in Africa (BADEA), with a stable outlook. This maintenance of the highest level of rating for this multilateral institution is based on several key elements, according to the agency: constant support from its Arab shareholders, prudent financial management, and an ability to withstand the economic vagaries of the African countries where it operates. .
BADEA, a multilateral institution created in 1974, benefits from robust capital, now increased to 20 billion dollars, and presents a financial profile which has so far been able to weather crises.
The JCR underlines BADEA’s prudence in its risk management. For almost fifty years, the bank has not suffered any credit losses on its loans in sub-Saharan Africa, despite the risk profile of certain borrowers, 90% of its borrowers have ratings lower than “B”. Its privileged creditor status, a characteristic shared with other multilateral development banks, protects it against payment defaults. At the end of 2023, its bad debt rate represented only 0.5%.
The JCR considers as an asset the fact that BADEA’s financing focuses only on non-shareholder countries in Africa, which allows it to remain focused on its role as an economic bridge between the Arab world and the African continent.
The rating agency notes that, although not profit-oriented, the bank has remained profitable so far, with interest income from its loans and income from its investments having exceeded operational costs. In 2022, a deficit of $188 million was recorded due to a loss in value of its investments, but profitability was restored with an operating surplus of $292 million in 2023 and $101 million in the first half of 2024, specifies the agency.
Its liquidity was boosted. The institution headed by the Mauritanian Sidi Ould Tah displays a proportion of liquid assets (cash and A-rated investments) which represents 43% of its balance sheet, a factor that the JCR considers essential in assessing its stability.
BADEA recently tested its attractiveness on the markets by launching a social bond issue of 500 million euros. The operation attracted many more subscribers than expected, with demand three times greater than supply.
Despite this demonstrated solidity, it remains exposed to the economic vulnerabilities of the region. The JCR recalls that maintaining this “AAA” rating will depend on the institution’s ability to manage these risks in an increasingly complex international environment.
Fiacre E. Kakpo
