DEVELOPMENT FINANCE

“It can take years to secure funding from vertical funds…”

Speaking at the CEO Forum of African Development Finance Institutions (DFIs), Mr. Admassu Tadesse, Group President and Managing Director of the Trade and Development Bank (TDB), addressed the critical barriers impeding access to vertical funds, which are vital for addressing climate change and achieving sustainable development goals.  “This is a serious bottleneck, especially when we are dealing with urgent issues like climate action and SDG implementation”, he stated. Highlighting the need for reforms, he called for streamlined processes, innovative funding solutions, and enhanced collaboration among global and regional stakeholders. These measures, he emphasized, are essential to unlock resources and accelerate Africa’s development priorities, ensuring timely progress toward sustainable growth and resilience. 

Rudy Veeramundar

The CEO Forum of African Development Finance Institutions (DFIs), held recently at the Hennessy Park Hotel in Ebene, brought together key stakeholders to discuss the future of sustainable development finance in Africa. Themed “Sustaining Development Finance in Africa: Perspectives into the Future,” the forum served as a platform for insightful discussions and strategic deliberations. Among the notable speakers, Mr. Admassu Tadesse, Group President and Managing Director of the Trade and Development Bank (TDB), delivered an insightful address, reflecting on the progress, challenges, and opportunities within the sector.

He highlighted the significant barriers faced by DFIs in accessing vertical funds, which are specialized financing mechanisms established to address global priorities such as climate change, sustainable development, and poverty alleviation. He pointed out that while these funds are essential for advancing development goals, the process of securing them is often overly bureaucratic and time-consuming.

We have built strong institutions and frameworks, yet the resources remain tied up in inaccessible structures.

“It takes four to five years to turn around an application for funding from vertical funds. This is a serious bottleneck, especially when we are dealing with urgent issues like climate action and SDG implementation,” he stated. He criticized the inefficiency of these systems, describing the application processes as more bureaucratic than those of the UN system.

Mr. Tadesse expressed frustration with the disconnection between global commitments and actual funding practices. He noted that while international forums often result in ambitious pledges and declarations, the on-ground realities for DFIs remain unchanged. “Year after year, we hear the right things being said at global conferences, but the behaviour and practice of these stakeholders do not align with the commitments made. This mismatch hinders progress on critical development objectives,” he emphasized.

Another key issue raised was the need for fit-for-purpose funding mechanisms. Mr. Tadesse explained that current systems often fail to recognize the operational standards and governance improvements achieved by DFIs. For instance, institutions like TDB, which have implemented robust governance frameworks and financial prudence, still face difficulties in accessing adequate resources.

“We have held ourselves accountable by implementing high governance and operational standards. Yet, the funding structures in place do not reflect these advancements. It’s time for the global financial system to adapt and provide funding that aligns with the capabilities and needs of DFIs,” he remarked.

Mr. Tadesse urged stakeholders to work collectively to unlock funding and address systemic constraints. He emphasized the importance of streamlining processes, reducing bureaucratic barriers, and ensuring that global funds are more accessible to African DFIs.

“Let the money flow. Unlock the funding. It’s not as if we have not done our part. We have built strong institutions and frameworks, yet the resources remain tied up in inaccessible structures,” he stated.

Mr. Tadesse also spoke about the journey of African DFIs, emphasizing their role in addressing market failures and fostering development. He reflected on the implementation of the Prudential Guidelines and Standards and Rating System (PSGRS) in 2008, describing it as a pivotal moment that introduced governance frameworks, operational standards, and peer review mechanisms.

“Over the years, we’ve learned tough lessons,” he stated. “The 1990s presented immense challenges for both commercial and development finance institutions, but these experiences led to the creation of robust systems like the PSGRS. Today, we have stronger institutions and enhanced confidence in our sector.”

While acknowledging the progress made, Mr. Tadesse highlighted ongoing structural challenges, particularly those exacerbated by global economic pressures. He noted that rising interest rates, shifting priorities in development aid, and geopolitical conflicts have created a complex funding landscape. “These factors have redirected critical resources, limiting the availability of funds for traditional development priorities,” he explained.

In addressing the constraints faced by DFIs, Mr. Tadesse emphasized the importance of innovation and strategic adaptation. He shared insights into TDB’s innovative ventures, particularly its foray into asset management, which allows the institution to manage funds on behalf of external partners.

“Our asset management division is a reflection of our ability to leverage institutional expertise,” he said. “It’s not just about managing our resources but creating new opportunities to collaborate with private foundations, nonprofits, and other stakeholders.“

He cited TDB’s trade finance fund as a notable success, which has grown to $200 million in just five years. “This fund started as an experiment and has become a significant asset class, attracting over 30 shareholders, including pension funds from Kenya, South Africa, and Mauritius,” Mr. Tadesse elaborated. He also noted the fund’s recent recognition, achieving an A-rating from the Japan Credit Rating Agency, which underscores its credibility.

Highlighting TDB’s decision to establish its headquarters in Mauritius, Mr. Tadesse praised the country’s reputation as a well-governed financial center. “Mauritius provides the governance and stability that institutions like ours require. It’s a strategic choice that has enabled us to innovate and grow,” he stated.

Local financial institutions, including the State Bank of Mauritius and Maubank, were acknowledged for their role in supporting TDB’s initiatives. “Our partnership with these institutions exemplifies the collaborative approach needed to drive development finance forward,” he added.

Year after year, we hear the right things being said at global conferences, but the behaviour and practice of these stakeholders do not align with the commitments made. This mismatch hinders progress on critical development objectives.

Looking ahead, Mr. Tadesse emphasized the importance of fostering collaboration and dialogue among DFIs, regional organizations, and global stakeholders. He pointed to the upcoming International Conference on Financing for Development, to be held in Seville, Spain, as a critical opportunity to address these issues.

“The conference will allow us to take stock of the past decade and chart a path forward. It’s not just about SDGs but also about reshaping the global financial architecture to better align with Africa’s needs,” he explained.

Mr. Tadesse also highlighted the need for DFIs to engage more actively in global discussions on climate finance, youth employment, and SME development. “We must advocate for practical solutions and ensure that global commitments translate into actionable outcomes,” he urged.

Mr. Tadesse concluded his address by reaffirming the critical role of African DFIs in addressing the continent’s development challenges. “Our industry has evolved significantly, but the journey is far from over. By embracing innovation, strengthening governance, and fostering collaboration, we can continue to drive meaningful change,” he stated.

The CEO Forum provided a platform for stakeholders to share insights, explore innovative solutions, and reinforce their commitment to advancing development finance in Africa. Mr. Tadesse’s address underscored the importance of aligning regional priorities with global development agendas and highlighted the potential for African DFIs to shape a more inclusive and sustainable financial future.