Objective and approach
The Initiative’s overarching objective is to boost the intermediation of LTF in Africa and to close the financing gap for firms, in particular SMEs, as well as for housing and infrastructure projects in Africa. This will be accomplished through a two-pronged approach aiming to improve market intelligence across Africa and providing impetus for effective reforms at the national level. First, the Initiative improves market intelligence on LTF in Africa through the LTF Scoreboard and second, the Initiative provides the impetus for effective reforms to deepen long-term finance markets at the national level by carrying out a series of Country Diagnostics.
The LTF Scoreboard provides insights on the comparative level of development of markets for LTF across Africa by assembling comprehensive data on four dimensions of LTF, based on the conceptual framework depicted below. On the two ends of the intermediation cycle are the Sources and Uses of LTF. The intermediation process goes partly directly through capital markets and partly through intermediaries, which in turn also use capital markets in the intermediation process, as for example mutual funds or insurance companies (Depth of LTF). The framework also encompasses the regulatory and policy environment (Enabling Environment). The LTF Scoreboard includes a benchmarking tool that can be used to compare the level of development of markets for LTF for different countries.The LTF Scoreboard and the corresponding database are hosted at the AfDB.
Going beyond comparative data, a series of country diagnostics are being undertaken to provide in-depth analysis of LTF markets in individual jurisdictions. The diagnostics encompass enterprise finance with a focus on SMEs, housing finance and infrastructure finance. The objective is to reveal strengths and weaknesses in the specific country context and develop policy recommendations to improve the intermediation of LTF. The diagnostics follow a transaction-focused approach working closely with private sector stakeholders and leveraging international good practice from other developing and emerging countries in using innovative financing techniques relevant to the African context. The first two country diagnostics were carried out in Côte d’Ivoire (2018) and Ghana (2019), and the third country diagnostic for Ethiopia is under preparation.
In the first year of operation, 2018, the partners of the LTF initiative have completed the first wave of data collection and set up the LTF Scoreboard. The first country diagnostic was carried out in Côte d’Ivoire in 2018 and was launched in February 2020 at a high-level event in Abidjan. The field work in peparation of the second country-diagnostic for Ghana was conducted in 2018/2019. The Country Diagnostic for Côte d’Ivoire has been finalized and is publicly available.The Country Diagnostics are intended to form the basis for dialogue with country authorities and donor partners with a view to promoting potential reform programs to deepen LTF finance markets.