news - Statement from EDFI on the European financial architecture for development report


Statement from EDFI on the European financial architecture for development report

October 14, 2019

EDFI welcomes the resounding call to action presented in the report by the “High-Level Group of Wise Persons”, chaired by Thomas Wieser.

The report highlights the urgent need for Europe to engage more in Africa and to step up its efforts to address climate change. The fight against poverty and inequalities is not yet won, and climate change has an increasingly large impact on communities, especially in developing countries.

The European development financial architecture plays an important global role. In this respect, the report shows clearly that European bilateral institutions are an important part of this architecture and deliver a majority of European development finance, particularly in Sub-Saharan Africa, where bilateral institutions currently deliver close to 75% of development finance for private sector operations and 90% for public sector operations. The report also acknowledges the importance of private sector development and the role that national DFIs play in mobilising private finance to tackle these challenges.

The Wise Persons Group is right to point out that Europe needs its system of development finance institutions and instruments to act in synergy to tackle the top-priority challenges. EDFI shares the group’s confidence that European development finance has the potential to achieve more global leverage and impact if it becomes more focused on key priorities and better coordinated.

For this reason, EDFI strongly endorses the very important short-term steps recommended by the Wise Persons Group to improve the situation. In particular:

  • Strengthening the policy centre: the ownership of development policy can be strengthened, and better coordination among institutions can improve the coherence of delivery. There is a significant potential for the financial institutions to harmonise standards in, e.g., impact measurement and safeguards against crowding out the private sector.
  • Use new EU budget instruments as a catalyst for improvement: the open architecture, which allows access for DFIs and IFIs to implement EU budget instruments, should be maintained to continue to stimulate innovative ideas and innovative ideas and value for money solutions. These EU instruments should always incentivise financial institutions to work on a level playing field and adhere to important standards, e.g., the international principles for blended concessional finance, as mentioned in the report.
  • Increase flexibility of EU instruments: the report rightly points to the need to increase the flexibility of the EU instruments and financial regulations should be adapted to respond better to new challenges and priorities.

EDFI also welcomes the Wise Person Group’s three options to create strong development banking institutions that are aligned with the European development policy priorities. Such institutions must have the capacity to undertake policy dialogue and support policy reforms that create the necessary conditions for crowding in private sector finance in collaboration with European DFIs. Current capacities fall far short of what will be needed to engage more in Africa and support the low carbon transition in countries also outside Europe and its neighbourhood.

There is a significant potential for the European / EU-level institutions to be more complementary to the EDFI institutions in these areas, and any institutional reforms at the European level should include specific plans to increase synergies with the national DFIs and development banks.

The Wise Persons Group’s report presents an opportunity to take the debate about the European financial architecture for development to the next level. It highlights the importance and necessity of reforming European institutions and instruments. As European DFIs we stand ready to contribute to these discussions and we are determined to make European development finance more effective and to increase our leverage and impact.

 source: EDFI website

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