The adapting role of DFIs in African development (Non-member)

ABOUT

Development finance institutions play a significant role in African markets where high risk perception and underdeveloped financial markets dampen investor appetite. DFIs have a developmental mandate but they retain a fiduciary responsibility towards their shareholders, usually governments. In this landscape, the lines have become somewhat blurred with DFI’s financing projects where private sector could fund. The DFI’s now compete for projects based on their term sheet in the market instead of creating projects. Each DFI has a different mandate, and these are specific to their operations and appetite. Grant funding is not typically offered and there is very small scope for technical assistance and concessional funding. DFI’s use patient capital and quasi equity although they are often capped at low levels.

Interrelated projects have different levels of risk and require different types of funding available from different stakeholders (a concessional requirement, a commercial requirement, a grant requirement, and an impact investing requirement). Overall DFI’s will be the most well positioned player in the finance eco system to facilitate and coordinate such funding given their developmental mandate. There is a need to attract local currency based offshore investment and fund mobilisation to allow local DFI’s to deliver a service offering which is more in line with the needs of real economies across the continent.

The panel session will explore the activities and approaches adopted by DFI’s in Africa which may be useful practitioners as they navigate the new terrain for investment.

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