G7 Development Finance Institutions Create Platform to Boost Investment in Fragile States

U.S. International Development Finance Corporation (DFC) and partner development finance institutions funded by the G7 nations, including the UK’s development finance institution CDC Group, have announced the launch of a new platform designed to boost investment in fragile and conflict-affected states in Africa.

The Africa Resilience Investment Accelerator (ARIA) aims to unlock investment in fragile states through collective influence and by pooling expertise to overcome the challenges of providing capital in these countries. Participation in ARIA advances DFC’s goal to prioritize 60 percent of projects in low-income and lower-middle income countries, and in fragile states, as identified in the agency’s development strategy, the Roadmap for Impact. It also advances the U.S. Strategy to Prevent Conflict and Promote Stability, which seeks to break the costly cycle of fragility and promote peaceful, self-reliant nations that become U.S. economic and security partners, implementing the Global Fragility Act of 2019.

Historically, DFIs have tried to originate investments in fragile states with mixed results. ARIA aims to engage proactively in such markets in a way that would improve investment-readiness – both a country’s readiness to benefit from DFI investment and DFIs’ abilities to invest in these economies.

DFC’s Chief Development Officer Andrew Herscowitz said, “While fragile states are some of the most challenging environments in which to invest, DFIs know that inclusive economic growth can help build peaceful and more prosperous futures for conflict-affected communities. DFC is thrilled to join our G7 partners in launching ARIA to help overcome the challenges we face in these markets to drive development impact. This collaboration advances our Build Back Better World goal of financing sustainable investment in infrastructure in those countries that often struggle the most to attract private capital.”

The UK’s Foreign Commonwealth and Development Office (FCDO) will support ARIA, which will be incubated in the CDC Group’s office in London. Vivianne Infante, CDCs current Ethiopia Country Director, will be seconded to run ARIA for the first two years.

She said: “DFIs have a mandate to provide investment to those that need it the most. Fragile states are desperately in need of capital to provide jobs and bring economic growth but investing in these markets is complex and challenging. ARIA’s work will be vital in addressing these challenges.”

ARIA will also identify several countries in which it will provide targeted coverage, develop expertise and arrange country missions. The intention is for ARIA’s country activities to foster greater collaboration amongst DFIs, with a longer-term ambition for more coordinated activities.

It is expected that ARIA’s work will uncover additional investment opportunities in targeted countries.

UK Minister for Africa Vicky Ford said: “Providing honest and reliable finance is one of the most effective ways to support countries to recover from conflict, create jobs and boost economic growth.”

The Africa Resilience Investment Accelerator will help development finance institutions to support the G7’s landmark commitment of providing $80 billion of investment in the African private sector by 2027.

ARIA’s areas of focus will be:

1. Market mapping: The development of a tool containing investment-related information, including key sectors, relevant local partners, financial intermediaries, potential investees and barriers to investment.

2. Integrity: A group to exchange views and experience around challenges relating to integrity, especially in investment due diligence processes, and to agree on common standards, approaches to work collectively to leverage information sharing across DFIs.

3. Conflict Sensitivity: The harmonization of best practices around conflict sensitivity, including the development of common standards and tools that the DFI community can use to manage investment activities in areas that are at high risk of conflict.

ARIA will be a key partner to the Oxford Fragility Forum. The Forum will remain the thinktank and academic stronghold at the forefront of issues around investment in fragile countries. ARIA will act as an action-driven platform where ideas discussed at the Fragility Forum can be put into practice. The members of ARIA are: CDC Group, DFC, Proparco, FinDev Canada, Cassa Depositi e Prestiti (CDP), in its role as Financial Institution for International Development Cooperation (Observer), JICA (Observer), Swedfund, International Finance Corporation, African Development Bank, European Investment Bank (Observer) and the European Bank for Reconstruction and Development (Observer).

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