Expanding local-currency financing to support sustainable development: Insights from AFD

Agence Française de Développement (AFD) is France’s public development bank, supporting the transition towards a fairer and more sustainable world across geographies and sectors.

In August 2026, AFD marked its inaugural listing on the Luxembourg Stock Exchange with a KES 2.5 billion bond on the Euro MTF market, highlighting the role of local-currency capital markets in supporting international development.

We spoke with Thibaut Makarovsky, Head of Funding and Market Operations at AFD, to explore the institution’s sustainable development approach, local-currency financing and funding strategy.

Could you briefly introduce AFD’s global mission and its role in supporting sustainable development?

Agence Française de Développement (AFD) is France’s public development bank. Our mission is to finance, support and accelerate the transition towards a fairer and more sustainable world, working with public and private partners across a wide range of geographies and sectors.

In practical terms, this means supporting projects that improve access to essential services, strengthen resilience to climate change, reduce inequalities and contribute to more sustainable economic models. As a development finance institution, we aim to combine long-term financing with policy dialogue, technical expertise and a strong focus on impact.

Sustainable development is at the core of our mandate. AFD was the first public development bank to align its activities with the Paris Agreement, and we are now pursuing a 100% alignment approach with the Sustainable Development Goals. This gives our financing activity a very concrete purpose: to mobilise capital in a way that supports development outcomes for people, communities and the planet.

Why did AFD choose to issue this bond in Kenyan shillings (KES), and what role does local-currency financing play in your activities?

The issuance in Kenyan shillings is an important milestone because it opens a new currency for AFD in the capital markets. More broadly, AFD tries to finance itself in as many currencies as possible in order to both optimise its cost of funding and diversify its sources. It reflects our ability to access diversified pools of currencies and to respond to investor interest beyond the traditional major currencies such as euro or US dollar. Over just the last two years, we were active in CNH, HKD, TRY and IDR, among other G10 trades.

As a matter of fact, AFD like many other development institutions, offers local-currency loans to its clients. Being able to offer both a loan and to finance AFD in local currencies reflects our commitment to develop local markets while optimising our cost of funding.

This transaction is also a signal of market innovation. Issuing in KES demonstrates that AFD can combine its strong international signature with more tailored funding formats, including in emerging-market currencies. While such transactions remain selective, they are part of a broader effort to diversify funding sources and support the development of more resilient financial ecosystems.

This transaction marks AFD’s first listing on LuxSE. What led you to choose LuxSE as the listing venue ?

This first listing on LuxSE is a meaningful step for AFD because Euro MTF has built a strong reputation, especially for international investors looking to lend in exotic currencies. For an issuer such as AFD, visibility, credibility and market infrastructure are important as we are trying to expand the volume of transactions in local currencies.

The Euro MTF market offers a flexible and well-recognised listing framework, which is particularly relevant for transactions in emerging-market currencies. In this case, the listing was not only a technical choice, but also part of creating an operational pathway that can support similar transactions in the future.

What key trends are you seeing in sustainable and development-focused financing, particularly in emerging markets and local currencies?

One major trend is the “normalisation” of sustainable-labelled debt instruments. What used to be an innovative and differentiating tool a few years back is now well established, marking both a slower growth in new sustainable issues but also, at the same time, a more widespread tool used to mitigate climate change and promote social inclusion.

In emerging markets, the financing need remains very large, particularly for climate adaptation, energy transition, urban infrastructure, water, transport and social services. At the same time, many countries face tighter financing conditions and higher exposure to currency volatility. This makes the question of local-currency financing increasingly important, because sustainable development cannot rely only on hard-currency funding where local revenues and economic activity are denominated in domestic currencies.

Looking ahead, what are AFD’s priorities for its funding programme, and could we expect a further shift in the balance local versus hard currencies?

AFD’s funding programme will continue to be guided by three priorities: securing reliable access to capital, preserving a diversified investor base, and aligning our funding activity with our sustainable development mandate. The euro market will naturally remain central for AFD as it’s its domestic currency, but also given its depth, liquidity and strategic importance for our balance sheet. Of course, being the first French agency to issue in USD and having done so continuously since 2009, AFD will remain active in this segment which offers a reliable diversification tool and in which AFD is strongly expected by its investor base. The 3-year and 5-year USD benchmarks executed during the first half of 2026, each printing $2bn with combined books above $17.7bn, illustrate the strong support for AFD trades.

At the same time, we expect diversification towards non-G10 currencies to remain an important feature of our approach. Local and emerging-market currencies can play a selective but valuable role when market conditions, investor demand and operational considerations are aligned. These transactions are not about replacing hard-currency funding, but about adding flexibility and building tools that can be useful in specific contexts.

Looking ahead, the balance between local and hard currencies could evolve gradually depending on market conditions and interest from investors. Hard currencies will continue to provide scale and liquidity, while local-currency transactions may offer targeted opportunities to support market development and investor diversification. For AFD, the objective is to keep a funding strategy that is robust, innovative and closely connected to the financial markets landscape.