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Development finance institutions in Africa

Development Finance Institutions (DFIs) are government-funded institutions that make investments in sectors and countries that would not otherwise attract significant capital. DFIs generally aim to have a developmental impact in the markets in which they invest, alongside the requirement for sustainable returns. Over and above the primary impact of financing development projects, there is a significant secondary impact precipitated by development finance institution investments. Private investors often tend to follow suit in frontier markets pioneered by DFIs, enabling the second wave of investors to leverage off established expertise and a coordinated strategy.

In 2005, the combined committed portfolio of DFI investment (including loans, equity, guarantees and debt) amounted to USD 182bn (te Velde, Warner, 2007), with USD 45bn of new commitments being made, indicating a relatively high turnover ratio.  Although, due to very limited information on DFI commitments, updated figures are not readily accessible, anecdotal evidence implies that this figure has, and continues to, increase significantly over time.

Some of the major development finance institutions investing in Africa are the International Finance Corporation (IFC), the Overseas Private Investment Corporation (OPIC), the CDC, as well as a number of European DFIs such as the European Investment Bank (EIB), Proparco, DEG, FMO, Swefund, Norfund, Obvium and a few others. There are also several African DFIs, the largest of which is the African Development Bank, and several regional DFIs.

 

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