British International Investment
19 June 2024

How development finance institutions are fostering growth in frontier markets in Africa

While many countries in Africa and Asia face the challenges of low income, fragility, or both, we prioritise investments in the more-vulnerable and fragile countries. These are places where private-sector investment remains scarce and it is hard to do business.

As part of our commitment to investing in these countries, we’ve developed the Africa Resilience Investment Accelerator (ARIA). ARIA unlocks investment opportunities in frontier economies in Africa by improving both a country’s readiness to benefit from DFI investment and DFIs’ abilities to invest in these economies. ARIA is helping to build a pipeline of investments for DFIs.

ARIA has published a new report that covers how DFIs are investing in frontier markets in Africa, the lessons they’re learning and approaches for fostering greater investment in the future.

The report – DFI investments in frontier markets: Activities, lessons learned and approaches to fostering investment – draws on an analysis of more than 2,700 DFI investments made since 2010 by nine DFIs and a survey of investment professionals from 11 institutions.

Some of the key findings from the publication are:

  • The nine DFIs analysed are committed to the continent – they invested $71.8bn over the period

  • As may be expected, DFI investment activity is highly correlated to a country’s population and GDP

  • Half of survey respondents have a strategy for investing in frontier markets in Africa

  • DFIs are keen to do more – 95 per cent of survey respondents said they are ‘very interested’ or ‘interested’ in expanding their activities in frontier markets

The report also includes case studies of DFI investments in frontier markets in Africa, including examples from BII’s portfolio. From these examples, it highlights some of the key characteristics of successful investments – including the value of working with strong external partners, early engagement and developing collaborative platforms between DFIs.

Looking ahead, the report explores approaches for delivering greater investment in frontier markets in the future. They include process and personnel examples – such as a more tailored approach for smaller businesses – as well as product-focused suggestions, including providing lower ticket sizes and local currency products.

This is the first in ARIA’s Foundations of Growth series of publications that shares the trends, lessons, challenges, and opportunities of investing in frontier markets in Africa. The series is aimed at helping DFIs, donors and impact investors develop their strategies for operating in these markets.

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