About the Long-Term Finance Initiative
What is the Long-Term Finance (LTF) Initiative?
The Long-Term Finance Initiative is the joint Initiative of the African Development Bank (AfDB), the Making Finance Work for Africa (MFW4A) Partnership, the Financial Sector Deepening Africa (FSDA) and the German Development Cooperation (BMZ/GIZ). Launched in 2017, the Initiative is hosted by the AfDB in Abidjan.
The Initiative’s overarching objective is to boost the intermediation of Long-Term Finance (LTF) so as to close the financing gaps experienced by the infrastructure, housing and enterprise sectors in Africa. The Initiative takes a two-pronged approach. First, the Initiative seeks to improve 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.
Why focusing on Long-Term Financing?
Long-term finance matters because it is finance for growth. While the emphasis of policymakers in Africa and the donor community during the past two decades has predominantly been on enhancing financial inclusion, there is a growing realization that this is only one side of the coin. As much as inclusion is important in reaching the marginalized or informal economy, long-term finance is needed to support growth of productive activities in key economic sectors. Longer-term investments support growth by reducing costs and risks (e.g. when finance is provided in local rather than foreign currency), increasing productivity and competitiveness, and thus creating jobs. While there was a need to accelerate investment to generate employment for the 12 million young people joining the labour force on the African continent every year even prior to the COVID crisis, fulfilling investment demands has become more acute, given the economic downturn arising due to the crisis, the resulting strains on fiscal budgets, and enhanced crowding out caused by increased recourse to Government borrowing.