Regional Consultation “Rethinking the Role of National Development

Banks” Johannesburg, 22 - 23 November 2006

EIB Support to Development Banks

in Africa

Lena Eriksson-ÅshuvudRegional Representation for

Southern Africa and Indian Ocean Islands

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EIB in a nutshell

EIB is EU’s Development Bank, owned by the 25 member states. Financing infrastructure and industry. €45 bn of loans signed annually – funded mainly through bond issues – 10% outside EU25.

Activity in Africa started in 1963 under the Yaoundé convention:LT loans, quasi-equity and equity to both private and public counterpartsCotonou – also guarantees.Direct funding of large infrastructure and industry projects – cofinancing w. local/international institutionsFunding to SMEs through financial intermediaries, inlcuding NDBs and RDBs.

Key objective – assist in development of financial markets for the long term. 

3

EIB in a nutshell

EIB is EU’s Development Bank, owned by the 25 member states. Financing infrastructure and industry. €45 bn of loans signed annually – funded mainly through bond issues – 10% outside EU25.

Activity in Africa started in 1963 under the Yaoundé convention:LT loans, quasi-equity and equity to both private and public counterpartsCotonou – also guarantees.Direct funding of large infrastructure and industry projects – cofinancing w. local/international institutionsFunding to SMEs through financial intermediaries, inlcuding NDBs and RDBs.

Key objective – assist in development of financial markets for the long term. 

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EIB Lending to Financial Institutions inSub-Saharan Africa (million EUR)

050

100150200250300350

1976-1990 1991-1999 2000-2006

National DevelopmentBanksRegional DevelopmentBanksCommercial Banks

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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  

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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.

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New strategy since turn of century : RDBs and especially commercial banks

Achievements:Better quality of firms financedLong term lending increased, especially

through RDBs

Unresolved problems: Access to credit of SMEs, especially start-ups Focus by many commercial banks on short

term lending

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Market imperfection still there

Can be partially addressed by RDBs. Can suitably designed/reformed NDBs play a

useful role? A few encouraging examples. EIB is still open to considering support to

establishment of NDBs in a number of African countries.

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Challenges

Case specific intervention – each country has its own challenges.

Setting priorities & clear and realistic definition of tasks.

Technical assistance: useful but no panacea.

Governance and institutional framework - commitment to proper institutions and governance essential.

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The European Investment Bankwill continue to support partners in

development that are best equipped to be effective in this work.

THANK YOU