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Economic Brief - Additionality of Development Finance Institutions in Syndicated Loans Markets in Africa
For nearly a decade before the 2008 financial crisis, global capital markets were characterized by increasing liquidity, and capital flows to Africa were on the rise (Figures 1a and 1b, Annex). Similar trends were observed in the syndicated loans market, where the volume of loans benefiting African borrowers increased by 60 percent between 2005 and 2007. As the crisis hit in end-2008, syndicated lending fell by 40 percent worldwide, and by about the same magnitude in Africa (Figure 2a, Annex). This trend reflects lower liquidity and flight to quality in global capital markets.
In that context, Development Finance Institutions (DFIs) played a counter-cyclical role. Boosted by capital increases, most were able to step up overall funding commitments. Participations in loan syndications were no exception. In Africa, both the frequency and share of syndicated lending with DFIs’ participation increased during the crisis (Figure 2b, Annex).