New contributors and market access inch onto ADF’s agenda

The African Development Fund, the concessional lending arm of the African Development Bank, is gearing up for what officials hope will be its largest replenishment yet. Momentum is building on two fronts: tapping capital markets, and fresh discussions about welcoming nonsovereign contributors for the first time. The fundraising push comes at a difficult moment for development finance, with major donors cutting back on official aid even as demand for concessional finance grows. The previous replenishment round, ADF-16, brought in a record $8.9 billion, and surpassing that in today’s climate will require new approaches. ADF is funded by contributions from donor countries. Going to capital markets — or issuing bonds to raise money from investors, as the International Development Association, the World Bank’s concessional arm, already does — would allow it to raise up to $5 billion per a three-year replenishment cycle. Currently, 67% of ADF shareholders — the largest of which include Nigeria, the United States, and South Africa — have signed off on allowing the fund to tap capital markets, said Valerie Dabady, who heads AfDB’s resource mobilization and partnerships department. The threshold for approval is 75%, with the deadline now set for Dec. 31, 2025. Dabady said she was confident they would get there. And while the move could dramatically increase available resources, it’s not without its risks. “What we’ve seen from IDA going to the capital markets is the risk that donors essentially think that you’re a self-managing machine,” Dabady cautioned, speaking to Devex on the sidelines of the Africa Climate Summit in Addis Ababa, Ethiopia, this week. “Market access doesn’t take away the need to have grant funding. And grant funding typically comes from donors.” Since ADF mainly provides grants, she said, resources raised from the markets would need to be blended with concessional funds “to bring it down to a level that is affordable.” At the same time, AfDB is exploring whether it can accept contributions from entities other than countries. “We were created 50 years ago. If you look at all the global funds and even something like Trade Development Bank, those have changed. That has started to allow for Class A and Class B shares. It’s, I think, another step in the evolution,” Dabady said. “Back in the day when it was only sovereign countries that could have enough money to contribute in terms of aid and ODA [official development assistance], now we know that you've got sovereign wealth funds and pension funds and you have foundations.” The Trade Development Bank is a multilateral trade bank operating in Africa. One question still under discussion is how to treat those nonsovereign contributors. Sovereign members currently receive voting rights, but Dabady said the bank will need to consider what nonstate entities could be offered in lieu of votes to encourage them to participate. The upcoming ADF replenishment will be the first major test for AfDB’s new president, Sidi Ould Tah, who began his term on Sept. 1. The first pledging meetings are set to take place in October. Dabady said Tah is keen to expand participation to new countries. Within the Gulf, only Saudi Arabia and Kuwait joined the last replenishment. He is now looking to bring in more Gulf states for the 17th replenishment round, or ADF-17, while also exploring potential contributors beyond the region, Dabady said. “Our job is to ensure that we continue opening and having a dialogue with all manner of countries. So for example, Australia, years ago, had gone through the process to become a member and then finally decided not to,” said Dabady. “So for me, it’s important to continue those types of discussions. There’s Singapore, we’ve talked to Croatia. So it’s casting the net wide.” The upcoming replenishment will test whether these innovations and outreach efforts can translate into fresh resources. Officials are hoping to broaden the pool of contributors and build on the record set by ADF-16.