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CONCLUSIONS. Common Point # 1. FfD is a domain that deserves a specific attention today No institutional approach; functional approach (de B) Yet, institutions matters (see below) A holistic view of FfD, including position within financial sector must be taken

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common point 1
Common Point # 1

FfD is a domain that deserves a specific attention today

  • No institutional approach; functional approach (de B)
  • Yet, institutions matters (see below)
  • A holistic view of FfD, including position within financial sector must be taken
  • No one-size-fits-all approach
  • Must take into account that DFIs in Zone Franc are submitted to commercial-bank regulations (provisioning, usury rate, etc. (Comores, BNDA)
common point 2
Common Point # 2

FfD’s raison-d’être is to bring finance to specific clients/projects

  • Market failures and vulnerable economic actors
    • Local level
      • Local groups (BNDA)
      • Municipalities (DBSA)
    • SMEs (ADB)
    • Renewable Energies
  • State failures
    • Infrastructures (DBSA, BOAD, CDG)
common point 3
Common Point # 3

FfD is composed of a combination of variety of (i) specific financial instruments, (ii) specific non-financial instruments.

  • Not just long-term finance
  • Specific Financial Instruments
    • Grants,
    • Loans
    • Leasing (DFCU, BOAD)
    • Guarantees (BOAD)
    • Equity participation (DBSA, Tunisia, BOAD, CDG)
    • Underwriting (DBSA, BOAD, CDG)
    • Arranging (DBSA, BOAD, CDG)
  • Specific non-financial instruments
    • Advorisy Services : “Development entails more than financing” (DBSA),
    • Technical Assistance (DBSA, BOAD, DFCU)
    • Capacity Building (DBSA)
    • External Technical Services (BNDA)
common point 4
Common Point # 4

Resources are needed to build FfD financial instruments.

  • Liquidity in banking systems is very important in Africa; not used for FfD (de B)
  • Two opposite situations
    • DFIs are banks
      • Relatively easy access to resources through deposits from clients and governments (BNDA, BGD)
      • Use of resources difficult because banking regulations (BNDA)
    • DFIs are not banks
      • Resources are more difficult to mobilize (BOAD, DFCU, DBSA)
      • Use of mobilized resources left to DFIs because of lack of external regulations
  • Concessional resources are needed
    • Yes (BOAD, CDG)
    • Not necessarily (DFCU)
common point 5
Common Point # 5

The organization supplying FfD (DFIs) must be a complex organization.

  • It must be a Knowledge Organization
    • DBSA : “We are an advanced knowledge-based organization”
    • BOAD : études sur le coton, PME, HIV, etc.
  • It must be an organization capable of playing multiple functions
    • Financiers
    • Partner (DBSA, BOAD, CDG)
    • Adviser (DBSA, DFCU)
  • It must be an organization knowing how to be a catalyst/facilitator (DBSA, BOAD, CDG)
  • When DFIs are banks, they must
    • Abide banking regulations (BNDA, BGD, Comores)
      • What can we do when regulators do not understand the constraints of FfD (BDEAC, BNDA)
      • Should not we revisit banking regulations to give more margin of action to FfD activities ?
    • How can the two domains (commercial and developmental) be coordonated ?
      • By combining them in a single organization (BNDA, BGD)
      • By separating the two domains (DFCU)
      • By creating separate entities for each developmental activity (BGD).
common point 6
Common Point # 6

DFIs can be profitable.

  • BOAD : “Nous n’avons pas vocation à faire des profits, mais dans la diversification et dans la conduite des actions nous générons des profits”.
  • DFCU, BNDA
  • DBSA : “making profit shields DFIs government interference”.
common point 7 1 2
Common Point # 7 (1/2)

As organizations, DFIs must have a specific governance.

Problem

  • Capital of the DFIs will be predominately public
    • Mission de service public (BNDA, BGD, DBSA, CDG, BOAD)
    • Political pressure to promote regional integration (DBSA, BOAD)
    • Market failures (private sector not interested)
    • State failures (national budget cannot finance)
  • Risks
    • Interference from government (BOAD, Comores, ADB, Egypt)
    • Civil servants managing FfD (Tunisia)
    • Crowding out private sector (IBRD)
common point 7 2 2
Common Point # 7 (2/2)

Proposed solutions

  • DFIs must diversify its shareholders to bring counterweight to government (BOAD, BGD)
  • DFIs must pay attention to the composition of their Board
    • Board Members should be trained and made aware that they have a responsibility (DFCU)
    • External personalities/independent persons will bring weight to Board (BGD)
  • DFIs that are not banks should impose on themselves stringent rules
    • Criteria of internal rules of some DFIs are more severe than banking regulations (SADCC)
  • Pressure from outside actors is useful
    • “Les marchés nous jugent” (BOAD)
    • Ratings are crucial (SADCC, BOAD)
  • Being profitable is best protection from government : see above (DBSA).
slide11
Make an inventory of DFI success stories & lessons learnt
  • Organise sub-regional consultations
  • Organise exchange of DFI best practices and standards
  • Liaise with other fora on corporate governance (IBRD, OECD)
  • Organise a working group on regulations to work on DFI specificities