kfw s approach to development finance in subsaharan africa
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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

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