A new report labelled Chasing Capital, which explains the critical role of African subregional development banks in financing infrastructure, trade, and climate adaptation on the continent, has been released.
The research titled Chasing Capital: African Sub-Regional Development Banks in Focus was released in Cape Town, South Africa targeting to unlock Africa’s Development:.
According to the report, despite their importance, these borrower-led institutions face severe financial constraints that hinder their ability to meet Africa’s growing development needs.
The study, conducted by AfriCatalyst, analyzes five key SRDBs:
● West African Development Bank (BOAD)
● East African Development Bank (EADB)
● Development Bank of Central African States (BDEAC)
● Trade and Development Bank (TDB)
● ECOWAS Bank for Investment and Development (EBID)
These institutions play a crucial role in addressing Africa’s $400 billion annual climate finance gap and the continent’s $100 billion yearly infrastructure investment needs.
However, their financial capacity remains far below what is required to drive sustainable development.
Among the key findings in the report are:-
● Low Capitalisation: BOAD’s capital base of $3.9 billion and BDEAC’s $1.3 billion pale in comparison to the African Development Bank’s (AfDB) $208 billion, limiting their ability to finance large-scale projects.
● Limited Access to Capital Markets: SRDBs collectively issued less than $2 billion in bonds in 2023, while AfDB raised $15 billion in the same period.
● High Borrowing Costs: SRDBs face higher interest rates due to weak credit ratings, making it difficult to attract investors.
● Climate Finance Shortfalls: Only 20% of global climate funds reach Africa, with SRDBs struggling to secure direct access to the Green Climate Fund (GCF).
The report proposes strategic reforms to strengthen SRDBs’ financial standing and increase their ability to mobilize resources, including:
● Expanding Capital Base: Attracting institutional investors, pension funds, and new international shareholders.
● Improving Credit Ratings: Securing guarantees from major development banks to lower borrowing costs.
● Strengthening Climate Finance: Gaining direct access to the GCF and issuing more green bonds.
● Enhancing Collaboration: Establishing co-financing partnerships with AfDB, the World Bank, and other global lenders.
