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Innovative Bonds

Financing Africa’s Future: The Untapped Potential of Non-Traditional Bonds

For decades, African countries have relied heavily on Eurobonds to bridge massive financing gaps for infrastructure, climate action, and the SDGs. Yet, these USD and EUR denominated instruments come with high costs, currency risks, and rating biases that strain public finances.

The African Development Bank (AfDB) estimates that Africa requires approximately US$170 billion annually for infrastructure development, with an estimated financing gap of US$68 to US$108 billion annually. Innovative non-traditional bonds offer a practical, often more concessional alternative by enabling diversification away from volatile USD/EUR markets, lower borrowing costs, reduced currency risk, and access to deep investor pools in China, Japan, India, Islamic finance hubs, and diaspora communities.

Supported by multilateral guarantees from the African Development Bank, the Asian Infrastructure Investment Bank, and the Japan Bank for International Cooperation, and by recent pledges at FOCAC 2024 and TICAD, these instruments represent practical pathways to unlock billions in new financing.

For our analysis, we explore five innovative bonds:

  • Panda Bonds – RMB-denominated bonds issued in China
  • Samurai Bonds – Yen-denominated bonds issued in Japan
  • Diaspora Bonds – Country-specific bonds
  • Masala Bonds – Rupee-denominated bonds issued in India
  • Sukuk Bonds – Sharia-compliant bonds

EXPLORE OUR DATA

Africa’s Total Eurobond Issuances between 1997 and 2025.

Eurobonds, a primary financing tool, presents significant challenges that exacerbate debt vulnerabilities and hinder sustainable development. The map below showcases issuances within the African continent between 1997 and 2025.

DR’s Key Takeaways:

  1. 19 African countries have issued 91 Eurobonds worth over US$111 billion in face value since 1997 to 2025.
  2. As of 2025, Tunisia holds the oldest active Eurobond- a 30-year US$150 million bond issued in September 1997.
  3. As of December 2025, Nigeria was the most recent Eurobond issuer on the continent.

Eurobonds vs Innovative Bonds Issuances

Unlike traditional instruments, such as Eurobonds, innovative bonds aim to address the structural limitations of traditional financing, offering a pathway to diversify funding sources and enhance fiscal sustainability. The graph below highlights the comparison between Eurobonds and Innovative Bonds issuances within the African continent over the years.

Key Takeaways:

  1. In Africa, the adoption of innovative financing instruments has been gaining traction. However, as of 2025, cumulative issuances of the five innovative bonds stand under US$20 billion, a small fraction of the US$111 billion in Eurobonds.
  2. Africa’s Eurobonds typically carry returns between 5-10%, which is significantly higher than the 4-6% of other emerging markets like Argentina, costing African countries an estimated US$4.2 billion annually in higher interest payments.

 Geographical Distribution of the Five Innovative Bonds

The charts below highlight the overall distribution by size of innovative bond issuances to date.

Key Takeaways:

  1. Only 14 out of 55 African countries have issued these bonds, reflecting slow adoption due to regulatory complexities and limited technical capacities.
  2. Only 1 multilateral institution, Afreximbank, has issued these innovative bonds to date.
  3. Of the five Innovative bonds, total issuances to date include:
    1. Sukuk Bonds – US$6.2 billion
    2. Diaspora Bonds – US$ 5.7 billion*
    3. Samurai Bonds – US$ 2.7 billion
    4. Panda Bonds – US$0.8 billion
    5. Masala Bonds – Nil
  4. As of 2025, Egypt holds the highest number of issued bonds.
  5. Compared to other bonds, Masala Bonds remain largely unexplored by African sovereigns despite their potential to diversify funding sources and mitigate currency risk.
  6. Countries such as Kenya, Uganda, and Ghana have increasingly expressed interest in Panda, Samurai, Sukuk, and Diaspora Bonds.

Official Exchange Rate per US$ Average Over Time

The graph below highlights the differences in local currency exchange rates over time.

Key Takeaways:

  1. Historical data shows that the yuan has been relatively more stable against the U.S. dollar compared to many African currencies, such as the South African Rand, Egyptian Pound, and Kenyan Shilling, etc, which have experienced steep depreciations.
  2. The relative stability of the yuan is an advantage, as it reduces repayment uncertainty. Even if the yuan movements differ in cadence from the dollar, its inclusion in Africa’s debt portfolio provides diversification benefits, helping countries spread currency risk across multiple reserve currencies.
  3. Over the past two decades, the Japanese yen has exhibited notable fluctuations against the US$ with periods of appreciation in the early 2000s followed by sustained depreciation after 2012.
  4. The Indian rupee over the past two decades has experienced a steady and pronounced depreciation against the US$, reflecting both structural trade imbalances and external shocks. This trend highlights the rupee’s potential role in diversification.

Deep Dive into the Five Innovative Financing Instruments

Panda Bonds

Launched in 2005, these are Yuan-denominated bonds issued by non-Chinese entities in China’s onshore bond market, primarily through the China Interbank Bond Market (CIBM) or stock exchanges in Shanghai and Shenzhen.

Key Takeaways:

  1. Egypt pioneered African Panda Bond issuances in 2023, raising 3.5 billion yuan, approximately US$478.7 million.
  2. Panda Bonds are increasingly vital for Africa due to China’s prominent role as a financier, with China lending over US$182 billion to the continent between 2000 and 2023 and US$50 billion pledged at the 9th FOCAC in 2024, offering a low-cost alternative to Eurobonds for infrastructure, trade, and climate financing.
  3. Globally, the Asian Development Bank (ADB) and the New Development Bank (NDB) have issued over US$1.2 billion in Panda Bonds as of 2025, demonstrating strong growth and market maturity.

Samurai Bonds

Launched in 1970, these are Yen-denominated bonds issued by non-Japanese entities.

Key Takeaways:
  1. According to Bloomberg, Tunisia was the first African country to issue a 10-year Samurai Bond in 2007, backed by Japan International Cooperation Agency (JICA) at US$300 million.
  2. Afreximbank, the only multilateral so far, has issued 3 Samurai bonds, marking a milestone for African multilaterals, and was backed by
  3. Most recently, the Cote d’Ivoire issued its first Samurai Bond, raising 50 billion yen (US$336 million). The issuance carries an ESG label, another first by an African issuer, symbolizing a growing appetite for Africa-linked sustainable debt instruments.

Diaspora Bonds

These are debt instruments issued by governments to their diaspora communities, typically in USD, EUR or local currencies, to fund development projects such as infrastructure, energy, and social projects aligning with national priorities and the SDGs by leveraging patriotic sentiments.

Key Takeaways:

  1. In 2008 and 2011, Ethiopia issued Diaspora bonds of unknown amounts towards the GERD infrastructure project.
  2. Nigeria issued a US$300 million Diaspora Bond in 2017, fully subscribed, targeting infrastructure and aiming for US$1 billion monthly remittances by 2025.
  3. According to Bloomberg data, several African countries have issued Diaspora Bonds between 2016 and 2024, namely Egypt, Eswatini, Namibia, South Africa, and Tunisia.
  4. Additionally, Ghana, Cabo Verde, and Kenya have expressed interest in issuing these bonds.

Sukuk Bonds

These are Islamic Sharia-compliant financial instruments structured to generate returns without interest, and they operate through asset-backed financing where issuers sell certificates to investors using proceeds to purchase tangible assets, i.e., infrastructure projects.

Key Takeaways:

  1. Nigeria was the first country to issue a Sukuk Bond (Ijara Sukuk) in 2013.
  2. Sukuk Bonds have continuously expanded into non-traditional markets, specifically in Africa, with countries such as Egypt that issued the country’s debut sovereign Sukuk in 2023, raising US$1.5 billion.
  3. Kenya launched its first Sukuk, the Linzi Sukuk, in 2024, raising KES 3 billion (approximately US$23 million).
  4. Sukuk Bonds are structured depending on the underlying contract, with the most common types being – Ijara Sukuk (lease-based), Salam Sukuk (forward contracts), Murabaha Sukuk (cost-plus financing), Mudaraba Sukuk (Profit-Sharing Partnership), Musharaka Sukuk (Joint Venture), and Hybrid Sukuk.

Comparisons Between the Five Innovative Bonds and Eurobonds

The table below shows key differences between Samurai, Panda, Masala, Diaspora, Sukuk Bonds, and Eurobonds.

Previous DR Work:

  1. Policy Brief – Financing Africa’s Future: The Untapped Potential of Non-Traditional Bonds: Access Here 
  2. Infographic: What do Africa’s Eurobonds mean for future debt levels and finance? Access Here 
  3. Report: How many Eurobonds does Africa have and how might it impact their budgets in the future? Access Here

 Glossary on the Different Types of Innovative Bonds

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