DFIs urged to rethink approach

Isaac Pinielo | Wednesday November 9, 2016 15:53

Patrick Dlamini, chairman of the Association of African Development Finance Institutions (AADFI), made the suggestion last week in Gaborone at the opening of the CEO Forum of the World Federation of Development Finance Institutions (WFDFI).

“The current global development challenges are enormous and require collective and integrated approach to weather the storm,” he said.

Dlamini also noted that the global and Africa development needs are well captured in the Sustainable Development Goals (SDGs) and the African Union (AU) Agenda 2063.

He cited 10 key global challenges encapsulated by the World Economic Forum in its recent publication, saying they require cooperation from the public and private sectors to be addressed, such as food insecurity, inclusive growth, employment challenge, climate change, financial crisis, digital disruption, gender equality, unequal global trade, long-term investment and challenges to global health. 

“It is very clear that addressing these challenges will require huge funding needs and will also create opportunities in various forms for the DFIs,” Dlamini said.

He therefore reiterated that DFIs across the continents particularly in emerging markets have enormous responsibility in mobilising resources both domestic and external support, in addressing the global challenges in a sustainable manner. 

He said beyond the need for resource mobilisation to fund development, the current wind of change in the financial environment with associated disruptions require a rethink in the way DFIs approach their businesses and the need to rise up to expectations with innovative solutions in delivering developmental impact that is inclusive and sustainable.

“The AADFI has collectively agreed to ensure that activities of member DFIs are directed towards meeting the SDGs. This was a decision we took during our last meeting in Lusaka, Zambia in May 2016,” he said.

Dlamini further noted that they are going to sustain their focus on the SDGs by setting up a monitoring mechanism to track their effort in implementing the agenda and working with other partners to achieve this aspiration.

For the AADFI, he said, they have taken some steps to be proactive in entrenching reforms that will enable the DFIs to easily adapt to the new changes in the financial environment, with the adoption and application of the AADFI Prudential Standards, Guidelines and Rating System (PSGRS) in their institutions.

“The PSGRS has helped in strengthening many African DFIs to operate in line with best practices,” Dlamini said.

He said most African DFIs are therefore prepared to work with other development partners and financial institutions from other continents in ensuring that the development challenges confronting ‘our continents are addressed’.

For his part, deputy chairperson of the African Union Commission, Erasmus Mwencha said there is a need to revisit the role of African Development Finance Institutions (ADFIs) with a view to reinforce their development potential and address their poor performance recorded over the last decade.

“In fact, over the last decade, ADFIs have shown low levels of profitability, with an estimated 2.4% return on average assets, and a high level of loan impairment, with a 15.8% of impairment loans to gross loans,” he said.

To avoid the repetition of the “disappointing performance” of African Development Banks, Mwencha underlined policy actions that can help DFIs remain relevant partners in achieving socio-economic transformation in Africa.