S&P Global Ratings has reported that African regional development banks are on track to expand their lending activities, supported by stronger capital buffers and newly introduced frameworks that widen their borrowing capacity.
According to the agency, these institutions are becoming increasingly crucial in bridging financing shortfalls and maintaining economic stability as global funding conditions tighten.
With climate resilience and infrastructure investment leading their priorities, S&P projects that African development lenders will play an even greater role through 2025.
In its October Supranationals 2025 Special Edition, the agency said revisions to its multilateral lending institution framework could lift risk-adjusted capital ratios by roughly 10%, potentially unlocking an extra $600–$800 billion in sovereign lending room across development banks.
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S&P explained that the ratio measures how much an issuer can safely lend without undermining its credit quality, a higher ratio indicating a stronger ability to withstand financial losses.
Among the major players, S&P identified the African Development Bank (AfDB), East African Development Bank, African Trade & Investment Development Insurance, and the Arab Bank for Economic Development in Africa (BADEA) as central to this lending expansion, according to Reuters.
The AfDB maintained its AAA credit rating, reflecting what S&P described as “extremely strong” capital adequacy. Its loan portfolio rose to $27.3 billion in 2024, with plans to scale up both sovereign and private-sector lending in the years ahead.
BADEA also grew its exposure to $3.8 billion and is targeting disbursements of about $18 billion between 2025 and 2029.
The agency highlighted hybrid capital issuance and exposure-exchange agreements, arrangements that allow lenders to swap parts of their loan books to distribute risk, as key tools enhancing resilience amid persistently high global interest rates.
Between 2021 and 2024, total multilateral lending increased by 4%, with African institutions accounting for 19% of that total.
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Image Credit: Polity
