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 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 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 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 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 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) 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) 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).
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