African Development Bank (AfDB)
The African Development Bank (AfDB) Group is a regional multilateral development finance institution established to contribute to the economic development and social progress of African countries that are the institution’s Regional Member Countries (RMCs). The AfDB comprises three entities: the African Development Bank (ADB), the African Development Fund (ADF) and the Nigeria Trust Fund (NTF). As the premier development finance institution on the continent, the AfDB’s mission is to help reduce poverty, improve living conditions for Africans and mobilize resources for the continent’s economic and social development.
The African Development Bank Group finances projects, programs and studies in the areas of agriculture, health, education, public utilities, transport and telecommunications, the industry and the private sector. The Bank Group has, since 1968, also sought to finance non-project operations, including structural adjustment loans, policy-based reforms and various forms of technical assistance and policy advice.
The African Development Fund (ADF) is the concessional financing window of the Bank Group that provides low-income Regional Member Countries (RMCs) with concessional loans and grants, guarantees as well as technical assistance for studies and capacity building in support of projects and programs that spur poverty reduction and economic development.
The Nigeria Trust Fund (NTF) was created in 1976 by agreement between the Bank Group and the Nigerian government. The NTF is a self-sustaining revolving fund. Its objective is to assist the development efforts of the Bank's low-income regional member countries whose economic and social conditions and prospects require concessional financing. NTF resources are allocated to projects, and not to countries (unlike the African Development Fund). Proposals concerning the poorest ADF countries, countries with small ADF allocations, and fragile states are particularly encouraged. In 2008, the Federal Republic of Nigeria and the Bank agreed to a ten-year extension of the NTF.
The African Development Bank continues to prioritize mainstreaming climate change and green growth in its portfolio and has committed to incorporating climate-informed design into 100% of its investments. In the area of Natural Resource Management, emphasis is on improved conservation, utilization, governance and management regimes for land, water, fish and forest resources as well as conserving biodiversity.
The Africa Climate Change Fund (ACCF) is a multi-donor trust fund managed by the Bank. The ACCF broadly aims to:
- Assist African countries to access larger amounts of climate finance and use funds provided more effectively;
- Help African countries to account for climate change in their growth strategies and policies, by means of upstream diagnostics and providing technical assistance;
- Provide capacity-building in climate change and green growth for African countries and stakeholders at national and regional levels.
Financing Instrument: Loans, Grants, Equity, Guarantees
Project scale: As of 2021, projects in the ACCF portfolio ranged from US$ 270,000 to $1 million. NTF projects have a funding ceiling of US$ 10 million.
Applicable geographical regions/country groups: Africa
Recipient categories: Governments, Businesses, Financial Institutions
The AfDB offers financial solutions to public and, to a lesser extent, private sector clients.
Most AfDB resources and projects are intended for its regional member countries (RMCs). Countries are classified under three categories on the basis of two criteria: (i) country-creditworthiness and (ii) GNI per capita. The first category comprises ‘not creditworthy’ countries with a GNI per capita below an established threshold updated annually (in fiscal year 2013-2014: $1,205). Countries in the first category are only eligible for concessional resources from the African Development Fund window. The second category contains countries with a GNI per capita below the operational GNI cut off but creditworthy: these are called ‘blend countries’ and are eligible for ADF and ADB resources. Finally, the third category is made up of countries above the operational GNI cut off and creditworthy. Those countries are eligible to ADB resources only. The Group’s credit policy has been reviewed in May 2014, enabling, under certain conditions, an ADF eligible country to borrow non-concessional resources from the AfDB window.
Non-sovereign operations comprise the provision of any financing arrangement to privately held companies, or eligible state-owned enterprises, without a government guarantee. Who is eligible:
- Large corporates
- Special Purpose Vehicles (including PPP and concessions)
- Private equity funds
- Financial institutions
- Eligible state-owned enterprises
The recipient of AfDB’s non-sovereign financing must satisfy the following core requirements. It must:
- Be incorporated in a member country of the African Development Bank (whether regional or non-regional). The project for which financing is sought must be located or implemented in one or more of the Bank’s regional member countries in Africa.
- The company must be majority owned by private investors, or publicly owned investors with proven autonomy.
- The company must operate under competent management and good corporate governance. It must comply with the Bank’s fiduciary and integrity safeguards and those of the relevant member countries.
The Bank’s financial participation in any project is limited to:
- 33% of the total cost of the project for project financing and corporate financing
- 50% of shareholders’ equity at any time in the case of facilities to financial institutions
- 25% of the total share capital of the investee company for equity investment
Thus, a minimum equity contribution is required from the sponsor.
The ACCF currently funds projects through its calls for proposals and demand driven window. The latest demand driven window focused on the following areas:
- Electrification of health centers in rural areas using renewable energy and energy storage technologies;
- Low carbon management of medical and sanitary waste including hazardous waste incineration;
- Land restoration in collaboration with farmers especially in the Sahel; and
- Support to the development and implementation of Nationally Determined Contributions (NDCs) and Long-Term Strategies.
The private sector is not eligible for the Africa Climate Change Fund.
The various stages from country programming to project completion and post evaluation are known collectively as AfDB Group's project cycle.
AfDB Group works with each borrowing regional member country to define a medium-term to long-term development strategy and operational program in a document called country strategy paper (CSP), formerly Economic Prospects and Country Programming (ECPC) papers. The CSP or CSPAR taking into consideration an exigency for performance and results, is aligned to the country's own development plan and poverty reduction goals, and its preparation or planning cycle.
Project preparation begins with AfDB Group’s interest to finance a given project or programme and includes both in-bank and external collection of information and data which will help the Bank’s Experts to appraise the project. During project appraisal, AfDB Group examines project feasibility through an appraisal mission. The appraisal mission - in consultation with the government and other stakeholders - examines the project's technical, financial, economic, technical, institutional, environmental, marketing, and management aspects as well as potential social impact. After the Senior Management Committee has completed its work and recommended the project or programme for Board approval, a draft project proposal is submitted to all parties involved including the Government for review. Feedback is collected, and the Government is then called for negotiation with AfDB.
Last updated: 7 September 2023