ABIDJAN — As a development finance institution, the African Development Bank has a mandate to “contribute to the sustainable economic development and social progress of its regional members” which often predisposes the bank to projects of imbalanced risk-reward trade-offs.
Accepting this heightened risk appetite, however, has solidified AfDB as the leading financial institution funding development projects on the African continent.
Over the years, the bank’s lending environment has improved and adapted to borrower countries’ evolving needs. AfDB introduced options that allowed borrowers to choose from a number of currencies, and since 2000 has offered borrowers the ability to customize their debt repayment profile with access to annuities or bullet loan repayments. Typically taking charge where commercial banks might decline, the risk management department is responsible for “managing, monitoring, and mitigating” the risk involved in lending, AfDB Risk Officer Soumen Dash told Devex.
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“When the commercial banks do not take interest in terms of cost and benefit analysis, and they find that the terms are not adequate and not attractive, then the development finance institutions like AfDB step up,” Dash explained.