African Development Bank: Initiative for Risk Mitigation

Description

In a new report co-sponsored by the Initiative for Risk Mitigation (IRMA), the Italian Development Cooperation and the African Development Bank, a survey was conducted amongst 112 investors and public officials. Across the 112 survey participants, virtually all stated that risk mitigation is needed to increase investment and access to finance in Africa. The principal reasons are two-fold:

Continued perceptions of unacceptable levels of risk throughout Africa; and
Increased demand for investment and access to finance from both domestic and international investors.

The need for a wider range of risk mitigation tools and products stems from the perception of significant risk, but also from the increased investment opportunities in Africa and the potential for private sector growth. This new, comprehensive report offers a specific needs- assessment on the perception of risk and sets forth recommendations on the types of tools that can be created to mitigate actual investment risk

As one survey respondant; the head of a leading provider of risk mitigation in Africa and worldwide, stated: "…While it may be counter-intuitive, as the risk decreases the need still increases because the amount of investment goes up. Quantum of risk is as important as the degree of risk in driving the need for risk mitigation..."

Another counter-intuitive finding of the survey is that the take-up on existing risk mitigation tools offered by multilateral development banks, export credit agencies and private insurers has been lower than expected. This is most likely due to very little technical knowledge about risk mitigation across a wide spectrum of investment stakeholders. The majority of survey respondents in this study suggested a solution to this dilemma would be the implementation of extensive training and capacity building programs.

The substantial need for risk mitigation in Africa is clearly evidenced by the survey responses in the IRMA report. Survey respondents in the IRMA report, on average, assessed the risk mitigation demand for [the entire continent of] Africa as significant: Specifically, on a scale of 1-5, Africa scored 3.74. It should be noted that most of the survey respondents, however, could/would only comment on one country and not on the continent as a whole.

The conclusions of the Report vindicate the efforts made by the African Development Bank in reinforcing its own Risk Mitigation platform, which is gradually becoming available also through its concessional window.

To download the entire English language report click on the link below.

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