The African Development Bank (AfDB) Group is a regional multilateral development finance institution established to contribute to the economic development and social progress of African countries that are the institution’s Regional Member Countries (RMCs). The AfDB was founded following an agreement signed by member states on August 14, 1963, in Khartoum, Sudan, which became effective on September 10, 1964. The AfDB comprises three entities: the African Development Bank (ADB), the African Development Fund (ADF) and the Nigeria Trust Fund (NTF). As the premier development finance institution on the continent, the AfDB’s mission is to help reduce poverty, improve living conditions for Africans and mobilize resources for the continent’s economic and social development. The AfDB headquarters is officially in Abidjan, Côte d’Ivoire.
A development bank’s mission is to promote the investment of public and private capital in projects and programmes that are likely to contribute to the economic development of its stakeholders. The bank therefore finances projects run either by the government or the private sector. The AfDB is one of the five major multilateral development banks in the world that provides assistance to its regional member countries with a view to helping them achieve their development goals.
The AfDB’s primary objective is to assist African countries – individually and collectively – in their efforts to achieve economic development and social progress. To this end, the institution’s main challenge is to reduce poverty on the continent. Combating poverty is at the heart of the continent’s efforts to attain sustainable economic growth. The Bank therefore seeks to stimulate and mobilize internal and external resources to promote investments as well as provide RMCs with technical and practical assistance. In partnership with various international and development organizations, including the United Nations, the World Bank, and the International Monetary Fund, the AfDB has, since 2000, undertaken to support RMCs in their efforts to attain the Millennium Development Goals (MDGs).
The Bank Group has 80 member countries, comprising 54 regional member countries (RMC) and 26 non-regional member countries (NRMC). The non-regional member countries are primarily from Europe, America and Asia. Initially, only independent African countries could become members of the Bank. However, due to growing demand for investments from African countries and because of the Bank’s limited financial resources, membership was opened to non-regional countries. The admission of non-regional members in 1982 gave the AfDB additional means that enabled it to contribute to the economic and social development of its RMCs through low-interest loans. With a larger membership, the institution was endowed with greater expertise, the credibility of its partners and access to markets in its non-regional member countries. The AfDB enjoys triple A ratings from all the main international rating agencies. However, the AfDB maintains an African character derived from its geography and ownership structure. It exclusively covers Africa. It is also headquartered in Africa, and its president is always African.
The African Development Bank Group finances projects, programs and studies in the areas of agriculture, health, education, public utilities, transport and telecommunications, the industry and the private sector. The Bank Group has, since 1968, also sought to finance non-project operations, including structural adjustment loans, policy-based reforms and various forms of technical assistance and policy advice. The AfDB Group has also widened the scope of its activities to cover new initiatives such as the New Partnership for Africa’s Development (NEPAD), water and sanitation as well as HIV/AIDS. The Bank Group is also involved in important initiatives on debt reduction, to the tune of US$ 5.6 billion under the Highly Indebted Poor Countries (HIPC) Initiative, which aims at reducing the debt stock of 33 eligible countries to sustainable levels. In 2006, the AfDB Group also made a commitment to cancel nearly US$9 billion owed by the countries concerned in order to help them attain the MDGs.
Each member country is represented at the AfDB’s Board of Governors, the Bank’s highest decision-making body. The Board of Governors elects the President during a session held in camera, open only to Governors and Alternate Governors of regional member countries and non-regional member countries. The presidential candidate is introduced by the Governor of the regional member country whose nationality they hold, and is elected for a five-year term, renewable once. The Board of Directors is responsible for the conduct of the Bank’s general operations and accordingly, has the authority to exercise all the Bank’s rights except those reserved exclusively for the Board of Governors. The AfDB President is responsible for the Bank’s management under the supervision of the Board of Directors. In this regard, he takes responsibility for the proper application of policies and guidelines issued by the Board. In July 2006, the Bank launched a major institutional reform aimed at strengthening the effectiveness of its operations on the ground, on the one hand, and on the other, to enhance its position as a centre for the exchange of knowledge in Africa. The Bank Group currently has about 1,500 employees, with the majority of them being Africans. The institution also hires from all parts of the world provided the candidates are nationals of non-regional members of the institution. While carrying out the Bank’s affairs, the President is supported by the Chief Economist along with five Vice Presidents who supervise 30 departments with 57 organizational divisions and 6 units. The Bank’s activities are controlled by the audit department, an independent evaluation unit and the internal administrative tribunal. In order to improve the quality of its interventions and dialogue with beneficiaries, the Bank Group has established offices in 25 regional member countries, with some of the offices covering many countries.
AfDB funds are derived from subscriptions by member countries, especially non-regional member countries, borrowings on international markets and loan repayments. Its resources also come from ADF and Nigeria Trust Fund (NTF) capital increases. The role of the ADF is to provide the institution’s regional member countries with resources to boost their productivity and economic growth. Its resources are derived directly from special contributions from states participants, especially non-regional member countries. Similarly, the NTF was established by the Nigerian government in 1976 to help the institution’s most underprivileged member countries and provide 2-4% interest rate loans repayable over 25 years.
Most AfDB resources and projects are intended for its regional member countries (RMCs). Countries are classified under three categories on the basis of two criteria: (i) country-creditworthiness and (ii) GNI per capita. The first category comprises ‘not creditworthy’ countries with a GNI per capita below an established threshold updated annually (in fiscal year 2013-2014: $1,205). Countries in the first category are only eligible for concessional resources from the African Development Fund window. The second category contains countries with a GNI per capita below the operational GNI cut off but creditworthy: these are called ‘blend countries’ and are eligible for ADF and ADB resources. Finally, the third category is made up of countries above the operational GNI cut off and creditworthy. Those countries are eligible to ADB resources only. The Group’s credit policy has been reviewed in May 2014, enabling, under certain conditions, an ADF eligible country to borrow non-concessional resources from the AfDB window.
The overriding objective of the AfDB is to improve living conditions on the continent through various initiatives. For example, Africa has the lowest water resources development level, with only 4% of its annual resources invested in water. Nearly 40% of the cultivated areas are irrigated and the energy potential is virtually untapped. The management and development of water resources are among the most crucial issues facing Africa. To take up these enormous challenges on the continent, the AfDB has led many water-related activities. The most important include the AfDB Rural Water Supply and Sanitation (RWSSI) which will grant access to an extra 33 million people to safe drinking water and sanitation by 2010. The Bank also participates in other major initiatives such as the African Water Facility (AWF) and the NEPAD’s Water and Sanitation Programme. In the same vein, agriculture and rural development are among the AfDB’s priorities. Projects to support the provision of rural infrastructure and the expansion of private agribusiness geared towards food security in Africa have been implemented. Road infrastructure, indispensable to regional integration and key to reaching isolated populations, is at the core of the Bank’s priority actions and projects.