Reasons why there's a need for DFIs in Africa

Africa is a continent with many valuable resources. These resources can reap many benefits for the continent and assist in economic growth. However, to date, Africa has yet to properly utilise these resources and is still underdeveloped. This is mainly due to corruption, military dictatorship, civil unrest and war, and more. These issues have caused many challenges in Africa, such as poverty, hunger, inequality, and low employment rates, affecting the economy and the quality of human life within the continent. 

This is why there is an undeniable need for Development Finance Institutions (DFIs), and this article will discuss those needs below. 

Offer financial assistance

The economy plays an important role in the development of and quality of life in a country. For developed countries, even when there is a drop in the economy, citizens are still able to recover once everything goes back to normal and the economy is up and running again. For developing countries in Africa, the unemployment rate increases, children can’t go to school, and health care is strained. All these issues affect the quality of life. With the help of DFIs, the African continent can get financial assistance to help finance and support Africa’s infrastructure development needs which will ultimately encourage economic growth. 

Mobilising resources

For sustainable economic development in Africa, resources need to be used effectively and efficiently. Natural resources contribute to a country in many ways, such as fiscal revenue, income, and poverty reduction, as these resources can contribute to creating jobs, especially in developing countries. Development Finance Institutions in Africa can help manage and ensure sustainable practises that can help entrepreneurs and small farmers, and in turn, contribute to employment in small communities within Africa. 

Attract investors

Many things attract investors to a country, and one of the primary factors is the economy and its stability. Sadly, that puts Africa in a challenging position as many things influence its economy. But foreign investments are vital for a continent, so the function of developing financial institutions is important. DFIs help developing countries attract investors. This is because DFIs aim to have a developmental impact in the markets in which potential investors want to invest. DFIs then become a catalytic tool that helps attract investors. 

DBSA’s role 

The Development Bank of Southern Africa (DBSA) is a DFI that strives to give aid to African countries. To do this, we ensure that we promote inclusive and sustainable economic development, growth and regional integration, mainly in South Africa, SADC and the wider sub-Saharan Africa. We do this by offering underdeveloped countries infrastructure finance and development. Since being established in 1983, we have helped promote economic growth and live by our mission statement of: 

  • Improving the quality of life for people within the continent through the development of social infrastructure that will benefit their lives. 
  • Supporting economic development and growth. 
  • Supporting regional integration. 
  • Promoting sustainable development to ensure no wastage of scarce resources. 

We focus on economic infrastructures such as transport infrastructure, ICT, energy, water and sanitation and social infrastructures like education, health, and human settlement. 

Final thoughts  

Africa has an abundance of resources that show great potential for the continent. Over the years, the continent has made strides towards development and standing on its own since its independence. However, the continent still needs help in ensuring it progresses and trades effectively with other countries. The importance of financial institutions in socio-economic development is undoubtedly noticeable in underdeveloped countries. We hope that over the next few years, we can do more to ensure economic growth and to better human life through fund management, planning, preparation, programme development, financing, and building and maintenance.