AFD and the European Union: Using Converging Strategies to tackle World's Development Challenges

The European Commission and AFD Group are now key partners. What are their shared goals?

AFD's activities are carried out through strategies that are part of a policy framework defined by the French government. First, there are those related to the global challenges the world is facing, such as the Covid-19 pandemic, climate change, biodiversity decline, and inequality. The European Commission and Agence Française de Développement Group have converging strategies in these areas, with the Green New Deal for Europe on the one hand and the 100% Paris Agreement commitment on the other. The same applies to questions of gender, human development, social inequalities, and social ties. While AFD positions itself as a gender-focused development agency, the Commission has decided, for example, that 85% of the projects it finances should pay particular attention to gender issues.

See also: How AFD is increasing its focus on gender issues

We also agree on the partnership approach. The Commission wants to encourage and enhance joint initiatives between development agencies, regardless of their scale, so that Europe can have a greater impact on the international scene. It also wants to talk with recipients on the ground to better address their needs. This is an approach that we fully subscribe to and that we are already putting into practice, based on the principle that a project is always better with several people.

Finally, we share an obligation of accountability. The Commission manages public money and is therefore accountable for its proper use. That's what we do too. This requires us to have a clear strategy and objectives and to put in place effective communication mechanisms.

From 2014-2020, the European Commission entrusted €2.8 billion in grants to AFD. What development projects did this money support?

First of all, it may be useful to recall that the European Commission and the Member States of the European Union together form the largest provider of development aid in the world (€66.8 billion in 2020). For 2021-2027, the Commission has increased the amount of official development assistance it plans to allocate to recipients in the developing world by 12%, despite the health crisis that has also affected European countries. This is a very powerful political message!

AFD is one of the Commission's key partners in this process. This partnership gives us the opportunity to scale up the projects we finance with a leveraging effect. In recent years when it comes to blending - a financing approach specific to financial institutions that consists of backing European grants with loans in order to increase their impact - AFD has been the leading recipient of Commission delegations in Asia and Latin America, the second largest in sub-Saharan Africa, and a key player in the Mediterranean. We also operate through simple grants, in sectors and countries where this type of instrument is needed.

Thanks to these grants, AFD has, for example, implemented the SECAL program in Haiti which aims to improve the local population's food security. With a total budget of €21.2 million, including €9 million in European funds, it has rebuilt irrigation systems destroyed by hurricanes - particularly Hurricane Matthew in 2016 - provided goats to farmers, and helped the corn industry transform itself to improve its revenues.

Another example is the Energy Efficiency Program for Buildings (EEPB). Implemented since 2018 in North Africa and the Middle East with Ademe and the German organization GIZhttps://www.giz.de/en/html/index.html, it was joined in 2021 by the Commission, which provided €29.8 million in investment grants and technical assistance. This money will make it possible to improve the consideration of these energy efficiency issues for an expected leverage effect of €380 million in AFD Group loans.

What does the integration of Expertise France into AFD Group since January 1, 2022 bring to Europe?

It establishes us as a comprehensive partner with the full range of tools and methods for development aid intervention: grants, loans, guarantees, technical assistance, mobilization of public expertise, etc. With Expertise France, the Group has further broadened its range of activities, with greater sector-based coverage - such as security, a sector in which we have not previously been involved - and greater geographical coverage. Our new subsidiary's mission is indeed broader than AFD's and has no geographical limitations. It is present in Europe, in Greece for example, as well as in Moldavia and Ukraine, territories for which the European Commission has high expectations. Expertise France also benefits from a network of partners that will strengthen our capacity for mobilization and impact.

See also: AFD and Expertise France: a comprehensive group

As it stands today, AFD Group can deploy a kind of division of labor. Expertise France for instance brings its know-how in crisis prevention and management, combating a range of threats such as terrorism and organized crime, as well as dealing with matters of security and peacekeeping. And while AFD provides expertise in support of public administration, Proparco provides it to the private sector. Another example is entrepreneurship: Expertise France works on improving the business environment, AFD has close ties with public banks, and Proparco can more easily establish relationships with companies.

This approach makes it possible for us to assist our counterparts on an even larger scale and better support sector-related reforms. It has also strengthened our European partnerships.

How will the partnership between the European Commission and AFD Group continue in the years to come?

We have very positive momentum, particularly in terms of donations and loan-grant combinations. I think that at the Group level we can aim for €1 billion per year in resources mobilized with the Commission, making it possible for our partners to have more impact. In addition to these financial instruments, AFD Group is seeking to mobilize European guarantees, whose budgets will increase significantly in the coming years and which will further improve our financing's leverage effect.

The new European strategy for 2021-2027 includes the desire to create "Team Europe" by promoting coordination between European development aid stakeholders. We have already made progress in this area, especially with our German counterparts at KfW with whom we have set ambitious targets: €2 billion per year in co-financing. We agree to double these commitments by 2023. There is also the Spanish Aecid and Italian CDP, to name a few. New framework agreements signed with these partners should enable us to set up a joint financing platform where these would be handled by a single party on behalf of the European public development banks.

The European range of services will then be more structured and have a greater impact on the development of those who need it most. The long-term challenge is to ensure that all the stakeholders in the "European family", from the oldest institutions such as AFD, which recently celebrated its 80th anniversary, to the most recent or smallest ones, work together to provide our partners with comprehensive, high-quality assistance services.