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Programme

Long-term finance initiative

September 2018

Long-term finance (LTF) – capital provided for more than one year – is vital to driving Africa’s economic growth and development. However, Africa currently faces significant long-term finance gaps for the real and social sectors. FSD Africa estimates that the funding gap for SMEs, infrastructure, housing and agri-business alone is over $ 300bn per year. A paucity of readily available data to make investment decisions is one of the key obstacles that is starving the continent of much-needed finance for long-term investments.

FSD Africa, together with our partners, the African Development Bank, the German Economic Development Cooperation (BMZ,  implemented by GIZ), and the Making Finance Work for Africa (MFW4A) Partnership, started the Africa LTF Initiative to assemble information about the provision of LTF across countries in Africa as well as to provide guidance as to how the public and private sectors can work together in strengthening the provision of LTF.

The initiative is creating a Long-term Finance Scoreboard which brings together different sources of available data on LTF into one easily accessible database. This allows for cross-country benchmarking using primary and secondary indicators on LTF – such as private credit, GDP, or stock market turnover. It also shows users where data availability is weak or strong. With the Scoreboard, investors have instant access to these indicators, facilitating a smooth investment decision-making process.

Alongside the Scoreboard, the Africa LTF Initiative is also completing in-depth country-by-country diagnostics focusing on existing investments directly involving the private sector. The case-study based methodology reveals local bottlenecks in the availability of LTF. The first in-country diagnostic of Cote d’Ivoire reveals the strengths and weaknesses in the transaction pipeline within critical sub-sectors – such as infrastructure, housing or enterprise finance – and identifies solutions to overcome challenges.

Targets:

To create greater investor confidence in the markets in Africa, catalyse new partnerships (including within the G20) in the development of long-term financing markets in Africa. The project will mobilise multi-donor commitment for building catalytic market information on long-term finance across Africa. This will ultimately lead to greater mobilization of long term-finance resource, to address long-term social and economic challenges in Africa.