AD HOC EXPERT MEETING ON
« Rethinking the role of National
Development Banks »
The quest for sustainability in
National Development Banks
Ignace MONKAM-DAVERAT
Financial and Private Sector Development Department
monkam-daverati@afd.fr
AGENCE FRANCAISE DE DEVELOPPEMENT
The AFD Group
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The AFD Group:
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the main institution in France with a global mandate for financing
development
A specialised financial institution, subject to banking regulations and
external auditing,
Its areas of expertise and know-how: urban development,
infrastructure, rural development, industry, financial systems, the
environment, education and health care.
The Agency offers a wide array of financial instruments ranging from
subsidies to loans at market conditions, adapted to the economic
situation of the country in which they are being used.
The Agency is active on five continents, where it finances economic,
environmental and social projects undertaken by local authorities,
public companies, territorial bodies and the associative and private
sector.
Proparco is its specialised subsidiary in financing and promoting the
private sector
Ad Hoc Expert Group Meeting - New York, 1-2 December 2005
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Geographical Coverage
• Over 60 countries in Africa, Mediterranean countries, Asia and the
Caribbean - a network of 45 local offices
Introduction
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Consequences of inefficient financial systems in
developing countries :
• Financial needs are not satisfied on local capital market
• Insufficient financial institutions and financial infrastructure to
favour resource circulation between savers and borrowers
(financial intermediaries, financial markets, settlement systems,
…)
• Inadequate funding with maturities and interest rates that match
the investment needs of the productive sector
NDBs can be a solution to fill the gap
Ad Hoc Expert Group Meeting - New York, 1-2 December 2005
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The AFD experience with NDBs
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In Africa : support to 25 NDBs between 1960
and 1990 as :
• shareholder
• technical assistant
• lender
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Over the world in countries of operations:
• lending to almost 100 NDBs
This experience allow the AFD to draw lessons
regarding key factors for sustainability of NDBs.
Ad Hoc Expert Group Meeting - New York, 1-2 December 2005
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Sustainability in National Development banking
Keys for success
GOVERNANCE
AND MANAGEMENT
OPTIMISATION
NDB
COMPETITIVE
POSITIONING
Ad Hoc Expert Group Meeting - New York, 1-2 December 2005
DEVELOPMENT
IMPACT
OPTIMISATION
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Sustainability in National Development banking
8 key factors for success
GOVERNANCE
AND MANAGEMENT
OPTIMISATION
COMPETITIVE
POSITIONING
1.Subsidiarity
3.Board and management
independence
4.Risk assessment and
management
5.Access to financial resources
6.High level of own funds and
prudential rules.
7.Control of operations for third
parties
8.Adaptation and anticipation
NDB
Ad Hoc Expert Group Meeting - New York, 1-2 December 2005
DEVELOPMENT
IMPACT
OPTIMISATION
2.Optimisation of impact
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Key factors for success
Competitive positioning
1.A principal mission clairely identified and subsidiary to private
local financial intermediaries by :
 The specificity of the sectors financed (infrastructure, housing,
agriculture, …)
 The specificity of the target clientele (companies, SMEs, farmers,
MFI …)
 The specificity of the geographic zone of intervention (specific
region of the country, regional integration, ... ).
 The specificity of the financial instruments provided ( intervention
with own fund, subsidised loans, garanties, long term resources…)
Ad Hoc Expert Group Meeting - New York, 1-2 December 2005
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Key factors for success
Development impact optimisation
2.The optimisation of the impact on development:
 Definition of indicators of impact and follow-up in the
implementation of projects
 Use of impact indicators as a tool:
to negotiate and communicate externally with Authorities
about the contribution to national development objectives,
 to converse with partners like donors
to improve project impact of projects on final
beneficiaries.
Ad Hoc Expert Group Meeting - New York, 1-2 December 2005
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Key factors for success
Governance and management optimisation
3.A corporate governance whitch preserve the independence of
the board and the management :
 In countries where public governance is weak, shareholding where
the state does not have the majority share.
 A board of direction whitch reflect the shareholders but also
opened to independent administrators from the private banking
sector
 A general management which masters banking skills and the
particularities of development
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Key factors for success
Governance and management optimisation
4.The mastery of risk and banking skills:
 The access to skills adapted to the risk control (methodology,
financial analyst skills, granting procedures, use of guarantees,
existence of operational risk limits, independence in grant
decisions, following and valuing risk)
 The soundness of internal control (procedures, organisation,
auditing, audit committee)
 The optimisation of financial management (treasury, asset and
liability management) and the pricing adapted to risk
 The monitoring of skills and staff
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Key factors for success
Governance and management optimisation
5.The sustainable access to subsidised resources and to the local
capital market :
 The need to have a wide array of financial instruments, ranging
from subsidies to subsidised resources and loan at market
conditions
 The mobilisation of subsidies and concessional loan from the State
and donors
 The mobilisation of resources at market conditions on the local
capital market, on the international capital market
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Key factors for success
Governance and management optimisation
6.A high level of own funds and the respect of prudential limits
in order to face:
 High-risk environment
 High-risk projects
 Operational risk
Ad Hoc Expert Group Meeting - New York, 1-2 December 2005
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Key factors for success
Governance and management optimisation
7.The control of operations for third parties, particularly they
are authorities :
 The initial negotiation on the service and its estimation
 Allocation of dedicated means and its management outside
every day banking operations
Ad Hoc Expert Group Meeting - New York, 1-2 December 2005
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Key factors for success
Governance and management optimisation
8.Adapting and anticipating evolutions in a changing environment
 Contribution to thoughts concerning evolutions in sectors of
intervention
 Partnership with local financial intermediaries, donors, local
financial markets, final beneficiaries of loans
 Permanent dialogue with Authorities
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Conclusion
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Key factors presented must be adapted with each national context.
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NDB is a instrument to alleviate ineffectiveness of local financial and
banking and sector but it isn’t the only one.
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This instrument can be expensive regarding public resources (subsidies, loan
with grant element, free taxes,…). So Authorities are going to see if they can
meet the same goal with less resources.
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The answer depend on each national contexte and the maturity of it financial
and banking sector.
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THANK YOU FOR YOUR
ATTENTION
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