AFD Group has been supporting the development of local financial systems since the early 1950s. Today, it is one of the leading donors operating in the financial inclusion sector in Africa. The Financial Systems strategy aims to shed light on the Group’s current practices and define the new orientations on providing support to local financial systems for the period 2018–2022, within a single strategic document.
Financial systems have undergone profound changes since the outbreak of the global financial crisis in 2008. The review of the regulatory framework for financial operators has led to an upheaval in the sector’s financial and institutional equilibria. In many developing countries, financial systems are still suffering from the consequences of the financial crisis. Because of their intrinsic fragility, financial systems in developing countries have not always been able to withstand this overall deterioration of the economic environment. The expansion of digital technologies in the financial sector is leading to changes in the practices of traditional institutions and fostering the emergence of new models.
Since the early 2000s, support for financial systems has accounted for nearly 20% of AFD Group’s commitments. Mostly comprising loans, guarantees and equity stakes, this support to financial systems is typically characterised by the preponderance of financing not backed by sovereign guarantees. In 2016, AFD Group’s activities successfully catalysed local investment to the extent of 2.3 billion euros and supported more than 11,000 small and medium-sized enterprises (SMEs).
To push this approach further and help to build inclusive, sustainable and responsible financial systems, AFD Group has crafted a new intervention strategy based on three priority objectives.
1. Promote access to financial systems. This objective must enable improved access to financial services tailored to the constraints of the household or entrepreneur soliciting the services.
2. Support the emergence of a new sustainable finance model. This objective must enable the financial systems to play a pivotal role in the economic, social and environmental transitions to come.
3. Consolidate the financial systems. This objective must enable support geared to consolidating the internal governance of the financial actors, while reinforcing the underpinnings of the institutional and regulatory framework set for their operations.
This strategy proposes an alignment with the French orientations on official development assistance (ODA) set out within the framework of the French Interministerial Committee on International Cooperation and Development (CICID) of November 2016. It is in complete harmony with the 2030 Agenda and as such contributes to achieving the Sustainable Development Goals (SDGs).
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