African Financial Markets Initiative (AFMI)

Financial sector development is paramount to successful and sustainable economic development. Indeed a more effective formal financial system will contribute significantly to a better allocation of resources for investments while an improved access to financial services for the poor and the rural population will help alleviate poverty. As part of the Bank’s strategy to strengthen the financial sector in African economies, the Bank has just launched the “African Financial Market Initiative” (AFMI) which is targeted to further the development of domestic African capital markets.

The objectives of the AFMI are multiple:

• To contribute to the development of local currency debt markets in Africa
• To reduce African countries dependency on foreign currency denominated debt
• To help enlarge the investor base in African Domestic debt Markets
• To improve availability and transparency of African Fixed Income Markets related Data
• To provide alternative sources of long term funding for borrowers in African currencies
• To create a permanent forum for discussion and provision of technical assistance on domestic bond market issues

The African Financial Market Initiative (AFMI) will put in place two building blocks for a long-term relationship between financial market stakeholders in Africa. It will also contribute to the setting up of a transparent and well-documented statistical environment for the financial markets. This will attract investors both domestic and foreign to the investments in financial markets. It will eventually improve financial market access for corporate borrowers and contribute to the creation of investment vehicles accessible to retail investors. It will also contribute to improve African countries’ borrowing terms in local currency, reducing their dependency on hard currency.

The AFMI will be led initially by the AFDB, however for it to be a success in the long run there will be a need for strong commitment from the stakeholders. The AfDB feels strongly that an initiative led by the users and piloted by all stakeholders will be beneficial to the continent as a whole. The deliverables of the AFMI are of different types and will ultimately enable to create an environment more conducive to business development and investment in domestic financial markets.