What AFD reform means for the future of French aid

As a result of a major aid reform, France’s development agency — Agence Française de Développement — is poised for greater financial capacity and “more regular dialogue” with the development community, according to AFD’s director of strategy. France’s aid reform, confirmed by French President Francois Hollande last month, will include the merging together of AFD and a financial organization under control of the French Parliament called the Deposits and Consignments Fund, or CDC. AFD’s annual financing capacity will rise from 8.5 billion euros ($9.22 billion) to 12.5 billion euros by 2020 and half of that increase will be directed towards climate change — raising annual climate financing from 3 billion to 5 billion euros by 2020. Devex caught up with Philippe Orliange, director of strategy, partnership and communication at AFD, to learn more about this reform and what it will mean for the future of French aid. Below are highlights from our conversation, translated from French: What does this reform — the merger of AFD and CDC — mean for France as a development donor? France needs to have a development financing tool that is on par with the new development and climate agenda, as it was formulated in New York, in Addis Ababa, and at COP21 in Paris … One way to [build that tool] is to increase the capacity of AFD to finance, but also to establish links between AFD, which finances international development, and the CDC, which finances development within France. The CDC is a type of public bank that’s existed since 1816 and that finances local communities, public transport, housing … and that in a certain sense participates in financing the SDGs within France. And that’s the profound part of this merger. The SDGs are a universal agenda, for all countries — developed, emerging, developing. So we hope that bringing together two institutions that in some sense do the same thing — one internationally, and the other domestically — will form a more solid outfit. As you’ve mentioned, AFD is a development bank, and not a development agency like the U.S. Agency for International Development, for example. Does this latest reform change that? No, that won’t change. AFD will stay a development bank that gives loans, including loans subsidized for countries with weaker revenues. But AFD is also a development agency that implements subsidies for the poorest countries, notably in sub saharan Africa. And what is important in the president’s announcement is that not only will France increase the volume of AFD loans... but France will also increase its subsidies, its grants…by almost 400 million euros by 2020. What countries will benefit the most from this reform? The reform is done so that AFD can continue to work in Africa, which represents around 40 percent of its activity, while at the same time develop its financing activity in middle income countries in Asia, in Latin America, and in the Mediterranean. And the increase in subsidies will permit AFD to work more, better, and in a more sustainable manner in the most fragile and vulnerable countries. Because we clearly see that whether it’s climate vulnerability or other forms of vulnerability — developmental, social, etc. — vulnerabilities nourish crises, crises feed conflicts. What does this reform mean for the global development community as a whole? For other donors, nongovernmental organizations, the private sector? What do they need to know? For the development community, this means several things. The first is that… France will take the growth of its public aid to development and return to the trajectory to reach the 0.7 percent [of gross national income] objective, so it will increase… concessional resources. That’s the first thing that it means. The second thing is that France, through AFD, takes the [Sustainable Development Goals] seriously. That France, through AFD, is organizing itself to give a concrete follow-up to the Paris climate conference, permitting AFD to do more in developing countries and emerging countries for ecological, social and economic transitions. Thirdly, it also means that AFD will work more with local communities — French communities, because the CDC is a financier of local communities [in France] — but also with local communities around the world. In addition, the French government, through AFD — which has increased its financing to NGOs in recent years — will continue to increase that financing, and beyond financing, develop a more regular dialogue with NGOs, with enterprises, with local communities… with a full set of actors in the development community. Read more international development news online, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you FREE every business day.