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EIB Support to Development Banks in Africa

Regional Consultation “Rethinking the Role of National Development Banks” Paris, 27 & 28 June 2006. EIB Support to Development Banks in Africa. EIB Lending to Financial Institutions in Sub-Saharan Africa (million EUR). EIB support to NDBs in Africa: 1970s & 1980s.

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EIB Support to Development Banks in Africa

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  1. Regional Consultation “Rethinking the Role of National Development Banks”Paris, 27 & 28 June 2006 EIB Support to Development Banks in Africa

  2. EIB Lending to Financial Institutions inSub-Saharan Africa (million EUR)

  3. EIB support to NDBs in Africa: 1970s & 1980s • NDBs seen as effective response to financial • (and other) market imperfections. • Support from multilateral and bilateral development • finance agencies. • EIB support aimed at two market imperfections: • access to finance of SMEs • provision of long term financial instruments • Loans, equity and quasi-equity

  4. Weak performance of NDBs in 1980s: • Weak management, governance problems. • Misguided directed lending policies. • Insufficient credit and risk culture. • Ill equipped to deal with equity operations. • Retreat from lending to NDBs since early 1990s.

  5. New strategy since turn of century : RDBs and especially commercial banks • Achievements: • Better quality of firms financed • Long term lending, mostly through RDBs • Unresolved problems: • Access to credit of SMEs • Prevalence of short term lending (commercial banks)

  6. Market imperfection still there • Can be partially addressed by RDBs. • Can suitably designed/reformed NDBs play a useful role? • A few encouraging examples. • EIB now considering to support establishment of NDBs in a number of African countries.

  7. Challenges • Case specific intervention, beware of general prescriptions. • Setting priorities & realistic assessment of tasks. • Technical assistance: useful but not panacea. • Governance and institutional framework: the lessons of conditionality. • Commitment to proper institutions and governance essential.

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