ARIA Foundations of Growth #1

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How development finance institutions are fostering growth in frontier markets in Africa 

A new publication from the Africa Resilience Investment Accelerator (ARIA) covers how development finance institutions are investing in frontier markets in Africa, the lessons they’re learning and approaches for fostering greater investment in the future. 

The publication – DFI investments in frontier markets: Activities, lessons learned and approaches to fostering investment– draws on an analysis of more than 2,700 DFI investments made since 2010 by nine DFIs and a survey of investment professionals from 11 institutions.   

Some of the key findings from the publication are: 

  • The nine DFIs analyzed are committed to the continent – they invested US$71.8bn over the period
  • As it may be expected, DFI investment activity is highly correlated to a country’s population and GDP
  • 17 countries in sub-Saharan Africa received less than US$1 in DFI investment per US$1,000 of GDP – 16 of these nations are included in the OECD’s list of ‘fragile’ countries
  • Work is being done – half of survey respondents have a strategy for investing in frontier markets in Africa
  • DFIs are keen to do more – 95% of survey respondents said they are ‘very interested’ or ‘interested’ in expanding their activities in frontier markets

The publication also includes case studies DFI investments in frontier markets in Africa. From these examples, it highlights some of the key characteristics of successful investments – including the value of working with strong external partners, early engagement and developing collaborative platforms between DFIs.  

Looking ahead, the publication explores approaches for delivering greater investment in frontier markets in the future. They include process and personnel examples – such as a more tailored approach for smaller businesses – as well as product-focused suggestions, including providing lower ticket sizes and local currency products.  

Read the report here.

This is the first in our Foundations of Growth series of publications that shares the trends, lessons, challenges, and opportunities of investing in frontier markets in Africa. The series is aimed at helping development finance institutions, donors and impact investors develop their strategies for operating in these markets.