AFD’s Financing Tool Set
Of all bilateral development banks, AFD and its subsidiary, Proparco, combine grants with the widest range of traditional and structured financial instruments. They include grants through private equity, as well as the most innovative credit and capital risk underwriting techniques. AFD’s special expertise is known as “financial engineering.”
Thanks to its AAA credit rating from Standard & Poor’s and Fitch’s, AFD can raise funds from capital markets to complement the grant money it receives from the French government and international philanthropic organizations. Additionally, AFD can also use its own balance sheet to guarantee the credit of the countries and entities it is assisting.
AFD’s strength in terms of credit capacity makes it possible to provide aid for long-term projects. AFD’s strength in financial engineering makes it possible to offer innovative financing solutions that are adapted to the geographic and economic context of each country through the use of a full range of below-market-rate and market-rate funding instruments. For instance, in a cotton-producing country in Africa, AFD structured its loans so that repayments are indexed according to the price of cotton on the commodities markets.
In the poorest countries, AFD’s funding aid is comprised of grants, subsidies and technical assistance. In more developed countries, AFD provides sovereign loans and financing to governments, and non-sovereign loans to public organizations, local authorities, and private enterprises.
AFD is also committed to developing Public-Private Partnerships. AFD not only participates in discussions about how to better use foreign aid funding from governments, but also seeks to tap private capital. Private grants from foundations, businesses and other organizations help offset reduced direct foreign investment, replenish grants from other groups, and make up for the weakness of local savings in developing countries. AFD also lends its expertise in financial engineering to support the activities of other large donors and for specific AFD Board mandates and arrangements.
Financing the Overseas French Territories
In the French Territories, AFD finances local authorities and supports investment in the private sector, especially the financial sector. AFD also provides guarantees and support mechanism for small and medium-sized enterprises in partnership with the Oseo Bank and other financial partners.
Debt Reduction-Development Contracts (C2Ds)
“C2D” is a procedure by which Official French Development Assistance (ODA) debt is cancelled. It is one of France’s specific components within the general framework of an enhanced debt reduction initiative known as HIPC. ODA repayments made by receiving countries are re-financed through grants made directly to the countries’ budgets.
Grants and subsidies
AFD grants go to projects being carried out in the least developed countries of the Priority Solidarity Zone (PSZ) Read more
Loans
AFD provides below-market-rate loans.Read more
Guarantees
AFD uses its own good credit and balance sheet to guarantee loan repayment
Private Equity
AFD’s subsidiary, Proparco, has a specialized team working to invest capital in businesses in countries that have under-developed capital markets and limited direct investment.Read more
Technical assistance
AFD’s technical assistance experts are made available to public administrations and local project beneficiaries. Read more
Debt Reduction-Development Contracts (C2Ds)