While Africa’s development needs are on the rise, a slowdown in the global economy is making it increasingly difficult for the continent to access international financial markets to fund its developmental objectives. This challenge is compounded as many African countries are unable to access global debt markets because their sovereign credit ratings are below investment grade. Furthermore, many African countries have considerable budgetary constraints on their public finances. A UN report estimates that between USD 600bn and USD 1.2tn will be needed annually to achieve the UN sustainable development goals (SDGs) in Africa (Source: UNCTAD).
In this context, development finance institutions (DFIs) are playing a critical role in plugging the finance gap in terms of funding development and supporting Africa’s infrastructure needs. DFIs are government-funded institutions that make investments into underserved geographies, sectors, and countries that would otherwise not attract significant capital. They combine the development objectives of traditional multilateral aid agencies with the commercial approach of private-sector banks and investors. DFIs require commercial viability in the projects they invest in and are seeking sustainable returns. While DFIs are mostly government-funded, they often sustain their operations and growth from their investment returns. A crucial role of DFIs is to mobilise capital from private investors by being ‘first-movers’ and derisking projects that are often considered too high risk by private investors.
Some of the major DFIs investing in Africa are the International Finance Corporation (IFC), the Overseas Private Investment Corporation (OPIC), as well as several European DFIs such as the European Investment Bank, the CDC, DEG, FMO, Porparco, Swedfund, Norfund, and several others.
Some of the major DFIs investing in Africa are the International Finance Corporation (IFC), the Overseas Private Investment Corporation (OPIC), as well as several European DFIs such as the European Investment Bank, the CDC, DEG, FMO, Proparco, Swedfund, Norfund, and several others. There are also a few African DFIs, the most prominent being the African Development Bank (AfDB).
Only in the last few years have the DFIs started publishing summary information on their investment projects. However, the information is presented in ways that make aggregation and comparison across DFIs challenging. The dataset reviewed covers a considerable portion of total DFI flows, but does not cover several prominent multilateral institutions and regional institutions such as European Bank for Reconstruction and Development, the Asian, African, and InterAmerican Development Banks or the Industrial Development Corporation (IDC).
