Millions of euros in European Investment Bank aid to Africa that were channeled through banks and private equity funds have ended up in tax havens, a coalition of non-governmental organizations claims.
A report by Counter Balance alleges that part of EIB aid funding to Africa has been funelled into African banks, a Luxembourg tax haven and a Nigerian bank charged with fraud.
“EIB’s due diligence and project partner selection have been compromised,” the report states. This “casts doubts not only on how fit for purpose these newly favoured investment models are – part of a worrying ‘financialisation’ of development that appears to be running unchecked even now in the aftermath of the most recent global economic crisis … but also on the overall development effectiveness of the EIB’s activities in developing countries.”
The report argues that the international private financial sector should not be tapped by EIB as a primary means of channelling development funding to local and indigenous private companies.
“Screening financial intermediaries both ex-ante and ex-post would absorb too many resources without necessarily generating a positive outcome and would divert capacity from trying to directly support local public and private sectors according to a development logic of mobilising domestic resources and capacities,” the report says.