AFD-KfW Partnership: The Franco-German Tandem Promoting Socially Responsible Investment

It’s official: a new partnership agreement, signed on Thursday 4 April in Frankfurt, formally recognises the ever-closer friendship and collaboration between AFD and its German counterpart KfW. Signed by AFD CEO Rémy Rioux and Joachim Nagel, a member of the KfW Executive Board, this "Memorandum of Understanding" comes at a time when Franco-German relations are being reinforced and constitutes a new focus of cooperation between the two groups.

The partnership sealed between AFD and KfW provides for closer collaboration on several levels, concerning strategy, operations, knowledge-sharing and joint communication. It sets out a certain number of non-exclusive priorities such as collaborations and joint strategic reflections on the effectiveness of foreign aid, the international climate agenda, the environment and the reinforcement of the European cooperation system. It also covers specific intervention zones such as Africa and the Sahel in particular, but also our near neighbours in the Caucasus and Balkans, where our two countries are facing the same challenges.

This new agreement also establishes thematic and sectoral priorities, including the implementation of the Paris Agreement, the search for appropriate responses to the challenges posed by migration, the reduction of inequalities and the promotion of gender equality, in addition to the development of the private sector and youth employment. 

As AFD and KfW are also financial institutions, they remain vectors of innovation and will now be able to collaborate on using public policy loans and mobilising the private sector to fund projects related to the Sustainable Development Goals (SDGs). 

In concrete operational terms, this new agreement aims to double the level of co-funding and the number of staff exchanges by 2022/2023. In the same spirit, there are plans to introduce more regular exchanges between the two institutions' managements teams in order to enable them to work even better together and help them to improve their knowledge of each institution’s respective procedures. These changes will be essential to enabling both bodies to jointly influence the debates currently in progress at the European and international levels on the future of development aid. 

This memorandum of understanding replaces a previous agreement of more limited scope, signed in 1998. It is consistent with the Aachen Treaty signed on 22 January 2019, which revises the 1963 Élysée Treaty and provides for stronger bilateral cooperation on sustainable development between France and Germany. This agreement also follows the Franco-German development roadmap, which was drawn up in 2018 and sets out the development priorities. It is expected to be signed by the Secretary of State for Cooperation, Martin Jäger, in Paris, at the end of April 2019. 

An enduring understanding 

The partnership between AFD and KfW is not new, since the first co-funding arrangements date back to the early 1970s. It has become stronger over the years and established an important milestone in 1998 with the signing of a first cooperation agreement. At the beginning of the 2000s, cooperation between the two groups really took off at the European level with the implementation of the Mutual Reliance Initiative (MRI), which enabled the recognition of procedures and delegation of tasks. More recent noteworthy events include the signing of a partnership agreement with the European Commission, the Italian Cassa depositi e prestiti (CDP) and the Spanish AECID. 

Over the last ten years, AFD and KfW have funded 55 projects together for a total of €6 billion, established a permanent staff exchange scheme between Paris and Frankfurt, developed the use of the European grant and loan-blending facilities, participated in the creation of the Practitioners' Network for European Development Cooperation and, finally, worked closely together on the International Development Finance Club (IDFC).

In addition to: District endowment funds (Ghana); Improvement of wastewater collection and purification systems in small and medium-sized municipalities (Morocco); Second phase of the National Sanitation Programme; Construction of rural roads and support for reforms underway in the cotton sector (Togo); Upgrading and extension of the electricity grid (Togo).