The African Development Bank (AfDB) on Thursday announced an equity investment of $24-million in the East African Development Bank (EADB) to strengthen its balance sheet and contribute to the improvement of its international credit rating.

In particular, $10-million would be “paid in”, with the balance in the form of callable capital.

The transaction, which would mobilise significant financial resources in the East African Community (EAC), would support capital market development, government revenue generation and foreign exchange, ultimately stimulating economic development and employment opportunities in the region.

“By partnering with the EADB, the AfDB will exploit synergies stemming from complementary sources of comparative advantage. The EADB, with its field presence and local knowledge of the East African market, provides a logical conduit for the AfDB to reach end-customers, including small-to-medium enterprises, by efficiently leveraging its scale,” the AfDB said.

The project was further aligned with the AfDB’s East African Integration Strategy, with its focus on subregional development finance institutions, as well as with the key pillars of the AfDB’s forthcoming long-term strategy, particularly private sector development and regional integration.

It would also assist the EADB to consolidate the gains of its successful restructuring programme and boost the existing business strategy of the bank by strengthening its capital base.

In addition to providing fresh resources to the EADB, the transaction was expected to improve the quality of the callable capital of the bank, which was a major factor driving its credit rating.

A technical assistance package, financed by the Fund for African Private Sector Assistance to reinforce institutional capacity at the EADB, would complement the proposed equity investment.

The EADB is a subregional multilateral lender based in Kampala, Uganda, and operating in East Africa.

Its member States include Kenya, Rwanda, Uganda and Tanzania.

The EADB’s interventions primarily take the form of loans, leases and equity participations.