The promise of regional financial architecture

Regional development banks (RDBs) and sub-regional financial institutions represent an underutilised catalyst for SDG acceleration across the African continent. These institutions possess inherent advantages that traditional multilateral development banks often lack: deeper understanding of local contexts, greater responsiveness to regional priorities, and stronger alignment with domestic development strategies. The African Development Bank (AfDB) Group has long championed climate action and green growth across Africa. It has expanded climate finance from US $500 million in 2008 to US  $39.2 billion between 2011 and 2023, supporting low-carbon and climate-resilient development. For 2020–2025, the Bank has committed US $25 billion from its own resources and aims to help Africa increase its share of global climate finance from 3% to 10% by 2030.

Similarly, Sub-regional development banks (SRDBs) in Africa, including the Eastern and Southern African Trade Development Bank, East African Development Bank, West African Development Bank, and ECOWAS Bank for Investment and Development, collectively serve 40 African countries. Despite their strategic positioning, these institutions face significant constraints including: 

• Weak institutional governance and limited mandate clarity: Sub-regional development banks face fundamental governance challenges that severely limit their operational effectiveness. These include:
  • Insufficient board oversight
  • Unclear decision-making processes
  • Conflicting priorities among member states that often reflect broader political tensions rather than development objectives
• Capital constraints and limited access to international markets: The most critical constraint facing these institutions is their severely limited capital base relative to development needs. These institutions face immense pressure to provide financing on a scale required for a country’s overall growth trajectory and transformation, yet their capitalisation remains woefully inadequate. The African continent faces an annual infrastructure funding gap of between US$68 billion and US  $108 billion. By 2040, the cumulative gap is expected to be around US  $1.59 trillion
• Credit rating challenges: One of the central challenges for RDBs lies in balancing market-based discipline, by leveraging private credit ratings with their developmental mandate to serve countries lacking market access. Overreliance on ratings risks excluding prudent but poor countries from essential long-term financing, potentially perpetuating underdevelopment
• Administrative and operational inefficiencies: SRDBs struggle with their ability to mobilise resources from global funds being impaired by administrative hurdles and excessive managerial costs. Even when banks achieve accreditation with international green funds, access to such funds remains cumbersome, requiring complex processes of funding criteria and approval which end-borrowers find hard to meet. This bureaucratic complexity particularly impacts smaller member countries that often lack the technical capacity to navigate complex application processes
• Limited cross-regional communication: These further hampers operational effectiveness. The lack of coordination between SRDBs means missed opportunities for knowledge sharing, joint project development, and economies of scale that could reduce per-unit costs of development financing