Africa’s High Borrowing Costs Shape New AfDB–ODI Development Finance Agenda

The African Development Bank Group and ODI Global are deepening their partnership to tackle one of Africa’s most persistent development constraints: the high cost and limited availability of long-term finance. Their new agenda links private capital mobilisation, concessional funding and financial-market reform as pressure grows to make scarce development resources work harder.

Africa's development ambitions are colliding with a financing system that remains too costly, too fragmented and increasingly short of concessional resources. The African Development Bank Group and ODI Global are now formalising a partnership built around a more difficult question than simply raising more money: how to change the way capital is structured, shared and mobilised across the continent.

Formalised through a Memorandum of Understanding, the collaboration will focus on the cost of capital, private investment mobilisation, financing for structurally vulnerable and transition economies, and more effective use of concessional resources. The agenda reflects mounting pressure on African economies as official development assistance tightens, debt burdens rise and climate and economic pressures intensify.

The partnership targets the machinery through which development finance is raised, distributed and leveraged, giving the initiative a wider relevance: Africa's financing constraints are tied not only to shortages of capital, but also to fragmented markets, expensive borrowing conditions and limited capacity to translate public and concessional resources into larger investment flows.

The cost of capital is becoming the development constraint behind the headline numbers

Infrastructure, energy systems, private-sector growth and wider economic transformation all require financing that can be sustained over long periods. African countries, however, continue to operate within financial conditions marked by high capital costs, fragmented domestic markets and growing pressure on concessional funding. These constraints can narrow the range of investments that governments, firms and development institutions are able to pursue.

The AfDB–ODI partnership approaches the problem from the architecture of finance itself. Comparative research will examine capital-market access, blended finance and concessional financing, while assessing how reforms to multilateral development banks and African financial systems could increase the amount of capital available under more workable conditions.

Several mechanisms under examination are designed to redistribute or reduce financial risk. Portfolio offloading, insurance, guarantees and other risk-sharing tools can potentially allow development institutions to use their balance sheets differently while creating conditions for private investors to participate in transactions they might otherwise avoid.

Greater private participation, however, cannot be treated as a substitute for every other form of development finance. Countries with thinner financial markets, weaker access to international capital or greater structural vulnerability may not attract commercial finance on the same terms as larger or more established economies. The partnership's explicit focus on vulnerable and transition contexts recognises that a single financing model cannot address every African market.

Concessional resources remain vital. Joint research will feed into work connected with replenishments of the African Development Fund, the Bank Group's concessional financing window for low-income countries, while informing efforts to make the Fund more responsive to financing constraints and capable of supporting private-sector development and additional resource mobilisation.

Development finance is moving from lending more to making scarce capital work harder

The partnership reflects a broader shift in development-finance thinking. Expanding lending capacity alone cannot resolve the financing challenge when public resources are limited and borrowing conditions remain difficult. Attention is increasingly turning toward how development institutions can use guarantees, balance sheets, concessional resources and risk-sharing structures to unlock financing beyond their own direct lending.

AfDB and ODI Global already have a history of cooperation around such questions. Their previous work has included engagement through the G20 and other multilateral channels on capital adequacy, callable capital and balance-sheet optimisation, along with joint participation in international policy discussions including the G20 Africa Engagement Framework Roundtable.

Turning those engagements into a long-term institutional partnership changes the scale of the agenda. Instead of producing isolated contributions to individual policy debates, the organisations intend to develop a continuing body of research and policy work capable of feeding African experience into discussions over concessional finance, multilateral development-bank reform and institutional effectiveness.

The most consequential part of that agenda may be the attempt to connect development-bank resources with private capital without losing sight of countries that depend heavily on concessional support. Guarantees and insurance can reduce risks carried by private investors, while portfolio transactions can potentially release capacity within development institutions. Yet the value of such mechanisms will depend on whether they ultimately expand affordable financing rather than simply rearranging financial exposure.

The collaboration will also consider lessons from development finance institutions dealing with sovereign and non-sovereign needs. Such a scope extends the conversation beyond government borrowing and into the financing conditions confronting businesses and other economic actors whose ability to invest is closely tied to the depth and functioning of domestic financial markets.

A major tension remains unresolved: development institutions are being asked to mobilise more commercial capital while continuing to protect scarce concessional resources for countries and projects that cannot operate on commercial terms. Finding structures capable of meeting both objectives will be more complicated than simply increasing leverage ratios or creating new financial instruments.

Africa's financing strategy is increasingly looking inward as well as outward

The partnership also sits within a wider African Development Bank effort to rethink where development capital should come from. It is expected to complement the New African Financial Architecture for Development, or NAFAD, endorsed under the Abidjan Consensus in April 2026.

NAFAD seeks to address Africa's estimated $400 billion annual financing gap by mobilising more of the continent's own financial resources. Its priorities include unlocking domestic savings, developing continent-wide guarantee and shared-risk mechanisms and deepening local capital markets.

Such priorities alter the conventional development-finance conversation. External concessional funding and international investors remain important, but deeper domestic markets could give African governments and businesses a broader financing base and reduce the extent to which major development ambitions depend on external capital alone.

Building those markets is not simply a matter of identifying untapped savings. Fragmented capital markets, uneven financial depth and different levels of institutional development mean that mechanisms capable of mobilising domestic resources will need to operate across very different national circumstances. Continental guarantee and risk-sharing systems similarly depend on how risks, responsibilities and financial exposure are ultimately distributed.

The AfDB–ODI collaboration could become an important testing ground for those questions because its research programme links multilateral reform, private finance, concessional resources and African financial-market development rather than treating them as separate agendas. Its ability to influence outcomes will depend on whether research translates into financing instruments and institutional changes that can operate in real markets.