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KfW’s Approach to Development Finance in Subsaharan Africa. Christian Dörner, KfW “The Role of National and Regional Development Banks in Africa” Paris, 27 - 28 June 2006. KfW Guidelines for Financial Sector Interventions. Objective

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KfW’s Approach to Development Finance in Subsaharan Africa

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Kfw s approach to development finance in subsaharan africa

KfW’s Approach to Development Finance in Subsaharan Africa

Christian Dörner, KfW

“The Role of National and Regional Development Banks in Africa”

Paris, 27 - 28 June 2006

Kfw guidelines for financial sector interventions

KfW Guidelines for Financial Sector Interventions


  • Sustainable development of efficient, inter-linked financial systems and viable institutions (Systemic Approach)

    Development Principles

  • Sustainability: Intended improvements in the financial sector remain in effect after completion of intervention

  • Subsidiarity: intervention only, where markets/private-sector institutions fail to provide appropriate funding facilities

  • Integration of intervention into overall development strategy of a country

  • Complementarity with other development partners

Kfw interventions

KfW Interventions

Consequence for Intervention Design (Institutional Level)

  • Promotion of sustainable institutions adhering to professional (banking) practices

  • No mere channeling of funds

    Product Clusters

  • Institution Building

    • Active intervention in building up sustainable institutions

    • Focus: Micro-/SME Finance

  • Refinancing Facilities

    • Refinancing of specific product portfolios

Institution building microfinance i

Institution Building (Microfinance) I


  • Transformation of NGOs into Microfinance Banks

  • Examples: UMU Uganda, Socremo Mozambique, NAMIB Namibia


  • Cooperation with existing commercial banks

  • Example: Rwanda


  • Foundation of new specialized Microfinance Banks

  • Example: MIFSSA-Initiative; Foundation of new Banks in 5 Countries (Ghana, DRC, Sierra Leone, Senegal, Rwanda)


  • Linking of NBFI to formal financial sector

  • Example: Caisses Rurales, Mali

Institution building microfinance ii

Institution Building (Microfinance) II

Broad Range of Instruments

  • Direct Equity Participation;

  • Participation in Investment Funds

  • Credit Refinancing

  • Technical Assistance

    Guiding Principles/Objectives

  • Establishing sustainable Institutions that contribute to structural deepening of financial sector

  • Private Sector Governance

  • Product Diversification: mobilization of local ressources via introduction of savings products, flexible credit products, other financial services

  • Transitory Assistance: implication of local and/or private partners at later stage

  • Mobilization of private capital via fund structures

Refinancing facilities i

Refinancing Facilities (I)

Guarantee Facilities

  • Mobilization of local (currency) funds for refinancing of financial intermediaries

  • Example: Ethiopia


  • Long-term wholesale refinancing of financial institutions

  • Matching with local funds

  • Examples: DFCU Uganda

    Provision of Credit Lines for Specific Financial Products

  • Objective: Broadening the provision of financial products

  • Transitory Assistance until product well established and refinanced from other (local) sources

  • Examples: Leasing (Uganda), Housing Finance (South Africa), Municipal Infrastructure Finance (South Africa)

Refinancing facilities ii

Refinancing Facilities (II)

Partner Institutions

  • Commercial Banks, Microfinance Institutions, Development Banks

  • Institutions have to adhere to professional (banking) practices

    Guiding Principles/Objectives

  • Institutions will be able to offer refinancing services even after expiry of KfW refinancing line

Concluding remarks

Concluding Remarks

Market Failures still exist

  • Crowding out of private credit demand by public deficit spending

  • Informational assymmetries

    Role of Donors

  • Promote/Cooperate with efficient, professional and sustainable financial institutions

  • Continuous extension of the financial frontier (innovative banking technologies, improved framework conditions for economic actors)


  • Enticing financial sector institutions to finance projects that lie (at least at present) beyond the financial frontier

  • Extending mandate of (public) Development Banks beyond the compensation of market failures

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