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Enhancing National Development Banks: Challenges and Opportunities in Africa

Explore the evolution of National Development Banks in Africa, EIB support, market imperfections, and strategies for success. Learn about recent reforms, achievements, unresolved issues, and the potential role of NDBs. Delve into challenges and key considerations for effective implementation.

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Enhancing National Development Banks: Challenges and Opportunities 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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