The African Development Bank Group (AfDB) has unveiled an ambitious plan to overhaul Africa's fragmented development finance system, saying a coordinated financial architecture is key to unlocking an estimated US$4 trillion in domestic savings to finance the continent's economic transformation.
Speaking at the African Trade and Investment Development Insurance (ATIDI) Annual General Meeting in Nairobi on Wednesday, AfDB president Sidi Ould Tah said Africa's biggest challenge was not a shortage of capital but the inability to channel available resources into productive investment.
"We are sitting on trillions of savings across the continent, but these trillions cannot be channelled to finance our development because we lack the confidence and risk mitigation mechanisms required," Ould Tah said.
He said the AfDB was spearheading the New African Financial Architecture for Development, a continent-wide framework designed to better coordinate development finance institutions, commercial banks, guarantee agencies, pension funds, sovereign wealth funds, insurers and capital markets.
Tah said Africa has the largest number of development finance institutions (DFIs) in the world, yet their combined balance sheets account for only about 1% of global DFI assets, underscoring the continent's fragmented financial landscape and limited capitalisation.
He said the new architecture would be built on four pillars — subsidiarity, coordination, complementarity and risk transformation — to ensure institutions work together rather than in isolation.
Under the framework, the AfDB would focus on projects requiring continental financing, leaving national and regional institutions to handle investments better suited to their mandates.
Tah identified the African Trade and Investment Development Insurance (ATIDI) as a critical pillar of the new system, saying its political and credit risk guarantees were essential for attracting private investment into African economies.
- AfDB approves Energy Access Finance Framework
- Zimbabwean to head AfDB’s South Sudan operations
- AfDB approves Energy Access Finance Framework
- Zimbabwean to head AfDB’s South Sudan operations
Keep Reading
"The issue is not resources. The issue is how we channel those resources into Africa's development," he said.
As part of the initiative, the AfDB is backing ATIDI's recapitalisation to strengthen its balance sheet and expand its capacity to de-risk investments across the continent.
Tah said the bank was also working with African governments to mobilise capital for both existing and prospective ATIDI shareholders, while encouraging more international development partners to join the institution.
Germany recently became ATIDI's largest non-regional shareholder, joining other international partners including Japan, Spain, Italy and the United Kingdom.
Beyond ATIDI, the AfDB plans to mobilise long-term capital from African pension funds, insurance companies and sovereign wealth funds while deepening domestic capital markets and advancing plans for a pan-African stock exchange.
"Our markets individually are very small. We need to link African stock exchanges to create a continental capital market capable of financing Africa's development," Ould Tah said.
The AfDB is also promoting the wider use of hybrid capital, an instrument that enables multilateral development banks to strengthen their capital base and increase lending capacity. Ould Tah noted that the AfDB was the first multilateral development bank to issue hybrid capital in global capital markets and intends to help other African financial institutions adopt similar instruments.
He added that strengthening institutions, improving the rule of law and implementing economic reforms would be essential to attracting a greater share of the world's estimated US$100 trillion in global savings.
The proposed financial architecture forms part of a broader strategy to reduce Africa's dependence on external financing by mobilising domestic capital and creating a more integrated financial system capable of funding the continent's long-term development agenda.
