Africa’s public development banks are under-financed and they must be fully mobilised to meet the continent’s climate and economic challenges.
Faced with unprecedented challenges—the disproportionate impact of climate change, the economic after-effects of the pandemic and the announced reduction in European development aid—the African continent must make the most of its resources and assets to build a sustainable future. The results of COP29, in particular the climate financing deemed insufficient by many developing countries, are a reminder of the persistent challenges facing multilateral processes. In this context, the strengthening of multilateralism and the impetus given to an ambitious development policy by the South African presidency of the G20 offer a valuable opportunity to promote more inclusive international cooperation geared to African priorities.
Representing over 10% of global investment, with $2,500 billion in annual investments, the 530 public development banks (PDBs) worldwide, united in the Finance in Common (FiCS) coalition, are unique financial players that support investment in all productive sectors of the economy, particularly sustainable infrastructure and agriculture, and promote financial inclusion. During the COVID-19 crisis, they proved their countercyclical role and resilience, accelerating their disbursements by up to +20%, particularly in Africa, by adapting their activities and supporting the private sector.
However, African PDBs are largely under-utilized to meet the continent’s challenges. With a diversified system ranging from large-scale institutions such as the African Development Bank (AfDB), the Development Bank of Southern Africa (DBSA) and the West African Development Bank (BOAD), to local entities essential to territorial development, these banks have demonstrated their ability to adapt and innovate to meet the Sustainable Development Goals (SDGs) while remaining competitive. In 2022, their financial performance outstripped that of their counterparts on other continents, with a return on average assets (ROAA) of 1.37% (0.46% for Europe). Despite this, their assets represent just 1% of those of global PDBs (compared with 80% for PDBs in G20 countries), while Africa is home to around a hundred national or regional development finance institutions (out of 530 worldwide).
It doesn’t have to be this way. With a clear mandate and modernised governance, African PDBs have the transformational potential to address market failures, take risks and innovate for the SDGs, prepare large-scale, high-quality projects, and maximize their ability to mobilize the private sector in Africa and internationally. Also, Africa, which makes a minor contribution (4%) to global carbon emissions, suffers disproportionately from the adverse effects of climate change. Its climate finance needs, estimated at $270 billion a year, are only being met to a small extent, to the tune of one-fifth. It is urgent to correct these imbalances by recognizing the strategic role of African PDBs. They are part of the solution!
Several initiatives demonstrate that, even in constrained contexts, African PDBs can be at the forefront of a sustainable transition in Africa. African countries have a place to play in the international debate on transition, starting in 2025—a year of major inflexion on the international agenda.
Recent examples illustrate their ability to innovate. DBS, which showed just $69 million in assets in 2022, led the way with a “debt-for-nature” swap in 2015, while the Development Bank of Rwanda (BRD) was the first PDB to issue a bond linked to sustainable development, mobilising financial transfers from the diaspora in the process. BOAD transfers its portfolio of assets into negotiable securities on the financial markets, and has just signed a historic transaction—the first hybrid, green bond. In South Africa, DBSA pioneered the award-winning green bond issue, demonstrating that a PDB can give a market signal and define the reference framework, including for the private sector. All these initiatives are promoted within the Association of African Development Finance Institutions (AADFI), which fosters cooperation for the promotion and financing of sustainable development in Africa.
The FiCS Summit, to be held from February 26 to 28, 2025 in Cape Town, South Africa, represents a key milestone in highlighting the role of BDPs in Africa’s economic and social transformation. Under the theme “Fostering Infrastructure and Finance for Just and Sustainable Growth”, this fifth edition will bring together PDBs from around the world, in parallel with the meeting of finance ministers and central bank governors from G20 countries under the South African presidency.
With the support of DBSA and the Asian Infrastructure Investment Bank (AIIB), FiCS will gather international institutions, philanthropists, representatives of the private sector and civil society to promote concrete solutions for developing countries. This solutions-focused summit will highlight their impact in areas such as infrastructure financing for climate action, inclusive finance or digital transformation. Among the key initiatives, progress in technical assistance and capacity building will be presented. Created at the FiCS Summit in 2023, the PDB Financial Innovation Lab recently launched its incubator, designed to support the development of innovative financial mechanisms.
In 2025, key moments will mark a turning point for redirecting global financial flows towards climate and sustainable development objectives: the FiCS Summit in Cape Town, the fourth Financing for Development (FfD4) conference in Seville, and COP30 in Belém. These meetings will be key moments for aligning global and African priorities, in particular the African Union’s Agenda 2063, and for giving PDBs a central role in accelerating concrete solutions for a just and sustainable transition.
