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Working Paper 325 - Unleashing the Potential of institutional investors in Africa

02-jan-2020

There is a growing appetite among the institutional investors to invest in infrastructure assets as they are looking to diversify their portfolios. Investment opportunities within African infrastructure sector can meet these expectations in terms of deal size and financial returns. However, multiple challenges still need to be addressed to multiply the investments in the region. The Multilateral Development Banks ( MDBs ) play an important role as catalysts for investments, as the investors often appreciate their expertise and ‘political clout’ in new investments that are perceived risky.

This paper analyses the potential opportunities for the MDBs , including the African Development Bank (AfDB), to engage with institutional investors to mobilize additional resources for Africa’s infrastructure development. AfDB’s Strategy and Operational Policies department conducted comprehensive phone interviews with a selected group of institutional investors and industry experts in order to understand investors’ preferences, investment strategies and their interest in collaborating with MDBs.

Based on the discussion held with institutional investors, this paper suggests that the MDBs should strengthen their focus to develop solutions that aim to scale up their project preparation facilities, set up co-investment platforms, develop innovative risk mitigation instruments, support the governance and regulatory frameworks and continue to support domestic capital market development.

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