Development Banks – Africa’s main type of DFI

Akhil D -

Hey everyone! This week, I am focusing on the types of DFIs in Africa.  The main types of DFIs we see in Africa are Multilateral Development Banks (MDBs) and Regional Development Banks (RDBs). MDBs are financial institutions set up by a group of states. They are tasked to foster economic and social progress by financing projects, supporting investment, and generating capital. RDBs provide financial support to projects and initiatives in low- and middle-income countries in their region.

There are 4 main institutions that operate within Africa.

  1. The African Development Bank (AfDB), headquartered in Abidjan, Côte d’Ivoire, is the biggest RDB in Africa and focuses on infrastructure development, agriculture, and education.
  2. The World Bank Group (WBG) is headquartered in Washington, D.C., and consists of 189 member countries. They focus on initiatives relating to poverty reduction, sustainable development, and private sector groups.
  3. The International Finance Corporation (IFC) is also based in Washington, DC, and is an arm of the WBG that specifically focuses on private sector development.
  4. The European Investment Bank (EIB) is headquartered in Luxembourg and consists of primarily European Union (EU) member countries. They focus on infrastructure development, climate action, and private-sector initiatives.

These institutions have made a lot of investments, including the Nigeria Electrification Project, Ethiopia Transport Systems Improvement Project, Mozambique Gas Project, and Agribusiness in Côte d’Ivoire.

Of course, MDBs and RDBs aren’t the only DFIs that have activity in Africa. Export-import banks provide trade finance to export companies. In other words, they help facilitate the exports and imports of goods for countries and companies. The biggest Export-import bank in Africa is the African Export-Import Bank (Afreximbank). It plays a crucial role in supporting intra-African trade and financing projects that enhance regional connectivity. Some notable projects include having a $3.3B crude oil prepayment sponsored by the Nigerian Petroleum Company Limited and launching an Intra-African Engineering, Procurement, and Construction (EPC) Contract Promotion Program.

Thank you for reading. See you next time!

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Comments:

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    camillebennett
    Hi Akhil, I'd love to hear more about how your site placement is informing this research! I am also wondering if any of these DFI's fund sustainability projects, like renewable energy? Can't wait to learn more!
    akhil_d
    Thank you for your comment! My site placement is helping me by providing their own research insights from past projects they have worked on. DFIs also fund many different sustainability projects! The African Development Bank (AfDB) alone finances the Desert-to-Power Initiative (DtP), the Sustainable Energy Fund for Africa (SEFA), the Africa Energy Market Place (AEMP), the Sustainable Utility Transformation (SUT) agenda, and the Facility for Energy Inclusion Investment Platform.
    Kashish Shah
    Hi Akhil! This is super informative. Does the way a DFI is funded or structured have a specific impact on its efficacy or function? For example, do infrastructure-centric DFIs have a specific structure that they all maintain? Thanks!
    akhil_d
    Hi Kashish! Thanks for your comment. Many DFIs do follow a very similar structure with how they are organized - it is almost running like an investment fund. However, there are some discrepancies based on the certain types of projects they finance. For example, the risk appetite in infrastructure-centric DFIs will differ significantly from that of education-centric DFIs, so their governance structure will be much more strict so the proper investments will be made. Thank you!

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