Sierra Leone’s nascent capital market saw the successful issue of a first corporate bond. Local microfinance institution LAPO (Lift Above Poverty Organisation) SL raised SLE 32 million ($1.4m) to expand its loan portfolio.

LAPO SL serves micro, small, and medium enterprises (MSMEs) in Sierra Leone, with 33,000 customers across 37 branches, of which 99% are women, with a focus on affordable loans to women from low-income households.

The Africa Local Currency Bond (ALCB) Fund is the anchor investor, investing some SLE 27m to back Sierra Leone’s economic growth. The bond issue was approved by the central Bank of Sierra Leone in December 2023 and the transaction closed on 12 June 2024.

The advisors were United Capital Group, a pan-African investment banking and financial services institution, and local corporate advisory firm Pennarth Greene, which is regulated by the Bank of Sierra Leone as an Issuing House and Financial Adviser including to to sponsor public issues of equities and bonds. It is also regulated in Europe and some African markets as a corporate finance advisor.

The bond launch was supported by Invest Salone, a private sector development programme funded by the UK Government’s Foreign Commonwealth & Development Office (FCDO) and managed by Cadmus, via the PROSPER Salone grant scheme.

Invest Salone provided a grant to the ALCB Fund to support the transaction hedging cost. It also provided local investors with a limited partial guarantee.

Gabriel Eshiague, Managing Director of LAPO Sierra Leone, said press release issued on 20 June: “We recognise and value the anchor role played by the ALCB Fund for the success of our debut bond. Besides being the largest investor, the ALCB Fund also supported the improvement of the bond documentation.

“This investment will support the development of our lending activities, providing more financing for low-income households, especially women. We are also very proud to be one of the pioneers in developing Sierra Leone’s capital markets.”

LAPO SL was established in 2007, began lending in 2008, and in 2017 became the first Sierra Leonean deposit-licensed microfinance institution. The majority shareholder is LAPO NGO, a Nigerian non-profit community development organization initiated in 1987 by Dr. Godwin Ehigiamusoe.

“Landmark transaction”

Dr. Claudius Bart-Williams, CEO of Pennarth Greene, said: “As Sierra Leone’s first officially approved local currency corporate bond, the central bank’s regulatory and approvals process is a key milestone for the country. This would not have been possible without the continuous support and guidance of the Bank of Sierra Leone.

“The transaction puts Sierra Leone in the spotlight, attracting new international investors who have never invested in the country before, as well as providing a new avenue for existing investors who are looking to diversify their portfolios. Furthermore, it gives a strong signal to the investment community that the authorities are open to attract additional sources of funding into the economy.”

Gbadebo Adenrele, Managing Director, Investment Banking at United Capital Group, said: “We are pleased to have advised LAPO SL on this landmark transaction. It not only strengthens the corporate bond framework but also deepens the Sierra Leonean capital market. At United Capital, we are committed to enhancing the capital market ecosystem across Africa through active participation in innovative transactions like this.”

This bond issuance is a bold move as United Capital, a leading financial services group, executes a strategy to expand across the African capital markets. United Capital Plc is listed on Nigerian Exchange and offers services in investment banking, asset management, trusteeship, securities trading, wealth management, consumer finance and digital banking, while contributing to economic growth and prosperity across Africa.

It was rated as #1 stockbroker by value in Nigerian market in July 2024, according to this press release and an interview in the Guardian Nigeria. It also led the listing of Transcorp Power shares for trading on the Nigerian Exchange (NGX), with a total market value ( market capitalization) of NGN 1.8 trillion ($1.16bn), according to our story on the listing.

Brock Hoback, Fund Lead of the ALCB Fund, said, “The Fund is delighted to have supported this historic transaction in Sierra Leone. We aim to push boundaries continually and unlock new markets. We hope this transaction will stimulate the Sierra Leonean bond market. The funds raised by LAPO SL will provide affordable loans to women from low-income households, enhancing their financial independence and empowerment, which aligns perfectly with our mandate.”

Christina Clark-Lowes, Invest Salone’s Investment Lead: “This transaction was an innovative way for us to achieve our goal of facilitating inclusive economic growth in Sierra Leone. We believe that this transaction will channel funding from institutional investors to local Sierra Leonean businesses, giving them access to an alternative source of financing and hence leading to improved private sector business activities in the country.”

About ALCB Fund and Invest Salone

Germany’s KFW founded the ALCB Fund in 2012 on behalf of the German Ministry for Economic Cooperation and Development (BMZ). The mission is to support the development of African capital markets by promoting primary corporate bond issuances in local currency. It supports African issuers, investors and intermediaries by acting as an anchor investor and providing technical assistance.

Invest Salone aims to increase incomes and jobs for thousands of Sierra Leoneans. It is private-sector development programme that boosts investment by strengthening the pipeline of investible firms and projects, supporting firms to grow their exports, and helping the private and public sectors to find lasting solutions to investment blockages that hamper business growth. PROSPER Salone is a grant-matching facility aiming to reduce the costs and risks of doing business in Sierra Leone.

Sierra Leone’s capital market

The Sierra Leone Stock Exchange (SLSE) was established on 17 July 2009. At the time, we reported that the Nigerian Stock Exchange was supporting it.

However, by mid 2024, the SLSE office was closed.

The road to the capital market started in 2007 when Sierra Leone passed a legal amendment to support the capital market development. The work was taken forward by the Stock Exchange Technical Committee, consultants and the Bank of Sierra Leone’s Capital Market Unit. The central bank trained and graduated 21 people as qualified to be stockbrokers.

When the exchange launched, the first listing was state-controlled Rokel Commercial Bank. Trading was illiquid and infrequent; trading hours were few. By 2017 there were reportedly three listings, Rokel Commercial Bank, First Discount House and HFC Mortgage (since renamed Commerce and Mortgage Bank (SL) PLC, a related entity of the National Social Security and Insurance Trust, NASSIT). Three more companies were reported to be interested to list their shares.

In 2017 a Securities and Exchange Commission Act was passed. There are two licensed discount houses which facilitate trading in bills and bonds.

Currently there are weekly auctions for Treasury bills of 91-day, 182-day and 364-day tenure with commercial banks as the main buyers and the main focus on the 364-day bonds with a total of SLE18.6 bn ($823m) in issue at end of April 2024 (90% of the total), according to the June 2024 Monetary Policy Report issued by the Bank of Sierra Leone. The one-year securities in March offered a yield equivalent to 40.88%. The two-and three-year Treasury Bonds total SLE 2.2bn and the Government has issued them to commercial banks to fund specific infrastructure projects.

The Bank of Sierra Leone is encouraging and regulating the next phase of capital market development. For economic statistics and other news, see the BSL publications page.