Agence Française de Développement (AFD) has a wide range of innovative and appropriate financial tools to support its partners. These include loans, grants, Debt Reduction-Development Contract (C2D), guarantees and more.
Loans: AFD’s main financing tool
AFD allocates different types of loans. Their terms are determined by the nature of the project and its environment (political, economic, social, environmental impact and context) and the quality of the borrower (sector of activity, rating, guarantees). In 2016, AFD has significantly increased the volume of its financing and 84% of the EUR 9.4bn committed were in the form of loans.
Grants: For the development of the poorest countries
AFD uses grants to finance actions in the social sector (health, education), rural and urban development initiatives, and infrastructure projects.
This tool may be in several forms:
- Grants to NGOs
- Debt Reduction-Development Contract (C2D)
- Delegation of funds from other donors
AFD allocates grants to a limited number of countries: poor countries considered as priorities. These are Benin, Burkina Faso, Burundi, Central African Republic, Chad, Comoros, Democratic Republic of Congo, Djibouti, Ghana, Guinea, Madagascar, Mali, Mauritania, Niger, Senegal, and Togo.
Projects financed via grants are appraised with the same rigor as those financed with loans. They have the same quality standards and effectiveness requirements (impact measurement). In 2016, grants accounted for 11% of the funds committed by AFD, i.e. EUR 1.1bn. 70% of this amount was invested in Sub-Saharan Africa.
C2D: a mechanism to relieve indebted countries
The Debt Reduction-Development Contract (C2D) is a tool to restructure the debt of certain countries. In practical terms, once a Heavily Indebted Poor Country has signed a C2D with AFD, the country continues to service its debt until repayment. At each payment on the due date, AFD transfers the equivalent amount to the country in the form of a grant. This amount is used to finance poverty reduction programs.
AFD implements the C2D on behalf of the French Government and handles its technical supervision for countries in the Priority Solidarity Zone (PSZ). The general policy for the C2Ds granted is defined by the General Directorate of the Treasury and Directorate General of Global Affairs, Culture, Education and International Development.
This procedure for the cancellation of Official Development Assistance (ODA) debts is intended for countries which belong to the category of “Heavily Indebted Poor Countries” (HIPC).
Countries eligible for C2Ds are Bolivia, Burundi, Cameroon, Congo, Côte d’Ivoire, Democratic Republic of Congo (DRC), Ghana, Guinea, Honduras, Liberia, Madagascar, Malawi, Mauritania, Mozambique, Myanmar, Nicaragua, Rwanda, Sierra Leone, Somalia, Sudan, Tanzania, and Uganda.
In 2016, AFD allocated EUR 315m under the C2D initiative.
CSO: Financing NGO projects
AFD and civil society organizations (CSOs) work together towards a common objective: strengthen civil society’s contribution to the implementation of the Sustainable Development Goals (SDGs).
The direct financial cooperation between AFD and CSOs today covers a wide range of instruments tailored to the specific characteristics of CSOs and their added value: support for innovation (Sectoral Innovation Facility for NGOs, financing from the French Facility for Global Environment, FFEM), financing for operations in fragile, crisis and post-crisis contexts (APCC), and support for their initiatives, via the CSO Initiatives mechanism.
FEXTE: A cooperation and project-preparation instrument
The Fund for Technical Expertise and Experience Transfers (FEXTE) funds technical-cooperation programs and project-preparation studies in developing countries.
In the countries that receive official development assistance (as defined by the OECD DAC) and in which AFD is authorized to operate, there are requests and needs for French expertise and experience. The purpose of FEXTE is to meet these requests and needs, all the while working towards the sustainable development of those countries.
Since 2017, all the beneficiary countries of official development assistance (as defined by the OECD DAC) in which AFD is authorized to operate are eligible for FEXTE, whatever the level of their per-capita gross national income.
The technical cooperation program must meet three criteria:
- Comply with AFD’s geographical and sectoral missions and priorities;
- Develop existing French expertise or experience;
- Contribute to French influence, in economic, public-policy and/or ecological diplomacy terms.
The mechanism can be used to fund several types of operations:
- Project-preparation studies: planning, pre-feasibility, feasibility, preliminary or detailed design;
- Technical cooperation: resident technical assistance, short-term or repeat expertise, high-level training actions, strategic partnerships between peer institutions.
In 2017, AFD granted 14.7 million euros as part of this mechanism.
Guarantees: An instrument to mobilize local instruments
Guarantees reduce the risk taken by local banks when they allocate a loan. AFD has established partnerships with over 80 financial institutions around the world.
The guarantees allocated by AFD facilitate access to financing for small businesses and microfinance institutions in developing countries. They also help French SMEs set up in business abroad. They are therefore an effective tool to promote investment and job creation.
FICOL: A springboard for the external action of French territories
The more development decisions are made at local level, the more they are effective. FICOL is the result of this observation: a mechanism which allows French local authorities to support projects in developing countries.
AFD has set up financing for French local authorities to support developing countries, especially with technical expertise. A new stage was reached in 2014, with the creation of the French Local Authorities Financing Facility (FICOL).
This tool allows AFD to directly finance projects, which are initiated and subsequently implemented by French local authorities. FICOL fits in with the context of:
- The Sustainable Development Goals (SDGs) adopted by the United Nations in September 2015;
- France’s commitments to the fight against climate change;
- The orientations for France’s development and international solidarity policy.
Adapt’action: Working together to tackle climate change
Following the Paris Climate Agreement, AFD has launched Adapt’Action to support countries seeking technical assistance for the institutional, methodological and operational implementation of their commitments to the fight against climate change.
With an objective of EUR 30m over a 4-year period, Adapt’Action will support 15 countries with a priority focus on Africa, the least developed countries (LDCs), and small island developing States (SIDS), which are among the most vulnerable countries to climate change.
Adapt’Action is based on three areas of operation:
- Support for “climate” capacity building and governance for the consolidation, implementation and supervision of the NDCs;
- Support for a better integration of the commitments made in the NDCs into sectoral public policies, particularly in the field of adaptation to climate change;
- Support for the preparation of structural programs in the field of adaptation to climate change.
In November 2017, six identification missions were conducted to determine the first beneficiary countries of Adapt’Action: the Comoros, Niger, the Dominican Republic, Tunisia, Madagascar and Mauritius. These missions analyzed the specific vulnerabilities to climate change of each of these six countries, identified the priority sectors, and prepared potential areas for action with them.
SUNREF: AFD’s green finance label
Sunref is one of the innovative tools developed by AFD to promote the emergence of “green” finance tailored to the needs of economic actors in countries in transition. It aims to allow local financial institutions to take action to fight against climate change.
Sunref helps develop the practices of financial actors via financial support and technical assistance to facilitate access to green energy and promote the sustainable management of natural resources. The ultimate goal: ensure the development of a low-carbon economy and allow economic actors to adapt to this transformation.
AGREENFI: AFD Group’s agricultural and rural finance label
AFD Group promotes the mobilization of financial institutions in emerging countries to achieve productive and resilient agriculture, improve living conditions for rural populations and foster the sustainable structuring of rural territories.
AGREENFI supports the transformation of the practices of partner financial institutions to promote financing for economic activities, including agricultural activities, in rural areas. These activities mainly focus on family farms, producers’ organizations, cooperatives, as well as microenterprises and small and medium-sized enterprises.
Thanks to a range of financial services tailored to the needs of local financial institutions, as well as customized institutional and technical assistance, AGREENFI also supports the implementation of local public policies for agriculture and rural territories. The ultimate objective is to facilitate access to appropriate financial services and technical, financial and management assistance for rural and agricultural actors. AGREENFI thereby stimulates the development of productive agricultural activities and their integration into value chains, basic services and non-agricultural income-generating economic activities.
AGREENFI is based on four main operating methods which increase and improve the local range of services (tailored to the specific nature of agricultural and rural activities) and reduce risks for actors who contribute to financing the sector. The four methods are as follows:
- Appropriate financial resources for local financial institutions
- A risk-sharing mechanism for financial institutions
- Support for capacity building for financial partners and actors in the agricultural and rural sector
- A possible investment grant mechanism for project initiators.
AGREENFI can support different categories of financial partners and themes related to the development of the agricultural and rural sector, provided a number of criteria are met:
Financial institutions
- Public and private banks
- Microfinance institutions
- Specialized financial institutions
Thematic areas and operations
- Financing of small and medium-sized farms (particularly family farms or cooperatives)
- Financing of fishing
- Financing of the processing and development of agricultural products and value chains
- Financing of sustainable practices (climate, biodiversity, water, soil, etc.)
- Financing of the forestry/sustainable timber sector
- Financing of economic activities in rural areas: basic services, non-agricultural income-generating economic activities
- Range of services
