De-risking capital is key to scaling up development finance – Adesina

  • OPEC Fund Director-General Abdulhamid Alkhalifa highlights need for remodeling financial operations to close the huge development financial gaps.

Global development financiers attending this year’s Organization of Petroleum Exporting Countries (OPEC) Fund’s forum in Vienna, Austria, have pledged a strong commitment to remodel their investments to support green projects at scale.

The delegates, representing multilateral development banks and intergovernmental institutions, said business and political leaders must do more to stimulate capital deployment from the private sector.

Muhammad Al Jasser, chairman of the Islamic Development Bank Group, cited the Desert-to-Power flagship renewable energy initiative led by the African Development Bank as “a great pioneering project.”

Al Jasser said the Islamic Development Bank is fully committed to financing green projects while balancing it with support for poverty reduction.

For Akinwumi Adesina, President of the African Development Bank Group, carving out new ways of project preparation and de-risking of projects to mobilize private sector investment at scale for sustainable development is key.

He said: “We’ve got where the private sector is. We’ve got US$ 145 trillion of assets under management (and) by 2026 it’s going to be there… but the issue here is that we need new ways of aggregation to prepare the projects, to de-risk the projects and lower the transaction cost for those deploying capital.”

While citing the Africa Investment Forum as one of the initiatives of the Bank and seven other partners said that the forum has from inception been a leading continental platform aggregating bankable projects in order to reduce fragmentation so as to make it easier to attract institutional investments.

“It [the Africa Investment Forum] has become today the premier investment platform to do anything on investment in Africa, and in the last four years, we have been able to leverage about US$ 142 billion of investment interest into energy, water and sanitation, infrastructure, and transport corridors”, Adesina said.

He added that the African Development Bank and its partners are also creating opportunities for the private sector to invest in agriculture through special agro-industrial processing zones, which are being established across the continent.

Adesina said: “We are bringing in private capital into agriculture that will create opportunities for the private sector to go into rural areas close to where the farmers are producing – they can buy food, they can process food, they can package food, they can export food and have a greater competitiveness for various value chains.”

Rémy Rioux, CEO of Agence Française de Développement, called for a consensus in redefining development finance.

He said: “We need a new narrative. We need to work on a framework to finance what nobody is financing – the most vulnerable communities. This is our core mandate, and we must be allowed to allocate part of the precious concessional resources to mobilize, to lower emissions, to go the private way.”

Rioux said he was looking forward for a New Global Financing Pact to pin down a roadmap for easing the debt burden of low-income countries, while freeing up more funds for climate financing.

According to him, the Paris discussions was expected to include the reallocation of International Monetary Fund special drawings rights (SDRs), while acknowledging Adesina’s advocacy for the African Development Bank to be the conduit for redeploying the SDRs to Africa.

Frannie Leautier, expert chair of the Independent Review of Multilateral Development Banks’ Capital Adequacy Frameworks, outlined areas that her committee identified to maximize the impact of their capital.

She had cited the areas to include, recognizing callable capital as a powerful instrument of shareholders’ commitment; adopting more financial innovations in capital deployment; enhancing dialogue with credit agencies; and undertaking reforms to enhance transparency.

Prime Minister Lotay Tshering of Bhutan, while paying tribute to multilateral development banks for their support, particularly for vulnerable and low-income countries said: “You are the group of people working beyond avenues for profit. You embrace countries beyond that of your own.”


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